Checking Bitcoin’s next move – Can US liquidity offer clues? 

• BTC’s current price retracement coincides with a dip in US liquidity. 
• QCP, an asset trading firm, sees flat funding rates as a great opportunity for bulls. 

Bitcoin [BTC] is a liquidity junkie and can quickly stall when there is not enough to survive on. 

According to pseudonymous crypto analyst Ted Talks Macro, the correlation between BTC and traditional liquidity is even stronger right now. 

The analyst noted that, 

“The correlation between BTC and traditional market liquidity remains strong. Slower periods of price action coincide with plateaus in available ‘liquidity,’ posted in February.” 

Source: X/Tedstalksmacro

The chart showed that the massive rally in 2021 coincided with a spike in liquidity (USD Bank Reserves delta) marked green.

Similarly, the 2022 bear market or crypto winter occurred when the liquidity was negative. So far, the rally in Q1 2024 also corresponded with an uptick in liquidity.

Unfortunately, the slight dip in liquidity in Q2 marked the current stalling of BTC prices. This underscores that BTC prices are subject to the whims of the US cash flow and global money supply. 

Will Bitcoin resume its rally when liquidity improves?

Most analysts predict the liquidity space will improve in the second half 2024.

BitMEX founder Arthur Hayes has previously viewed the US elections as a ripe opportunity for the US treasury to inject more liquidity. 

Ted Talks Macro shares a similar sentiment but projects that the fiscal liquidity space could be more favorable later in 2024. 

“The outlook for bank reserves is for them to fall into mid-year – Q3 as the RR facility is depleted…However, expect the green bars to come back quickly thereafter as financial conditions no doubt ease into 2025.” 

However, institutional crypto asset trading firm, QCP, viewed the depressed macro conditions as the perfect opportunity to go long. Part of the QCP’s Telegram statement read, 

“Perp funding is largely flat, with many Altcoins showing negative funding, which opens up a path for speculators to build leveraged long positions.”

If the macro plays out as mentioned, then the April market pullback could be one of the best discount windows for late bulls.