Why liquidity is more important than Bitcoin

Global liquidity has long been one of the cornerstone indicators used to assess macroeconomic conditions, especially when predicting the price trajectory of Bitcoin. As liquidity increases, so does capital that can be used to flow into risk fund assets (such as Bitcoin). However, in this ever-evolving market structure, a more sensitive and even more accurate measure emerges, which is highly correlated not only to BTC price action, but also to ecosystems.

Global M2

Let’s start with the global M2 vs. BTC chart. This is one of the most shared and analyzed charts on Bitcoin Magazine Pro for good reason. M2 supplies include all physical currencies and near-monetary assets in the economy. When major economies around the world aggregate, it clearly portrays fiscal stimulus and central bank behavior.

Historically, the major expansion of M2, especially those driven by currency printing and fiscal intervention, coincided with the explosive Bitcoin rally. The 2020 Bull Run is a textbook example. Trillions of dollars in stimulus floods global economies, with Bitcoin soaring from low thousands of dollars to more than $60,000. Similar patterns occurred in 2016-2017, and instead, the 2018-2019 and 2022 period saw M2 contraction consistent with the BTC bear market.

Stronger relevance

But while the RAW M2 chart is convincing, it is more feasible to watch global M2 vs. BTC year-on-year. The government tends to print funds all the time, so the basic M2 supply almost always tends toward the upward trend. However, the speed of acceleration or deceleration tells a different story. Bitcoin tends to rally when M2’s year-on-year growth rate rises. Bitcoin usually struggles when it falls or is negative. Despite the short-term noise, this trend underscores the close link between Fiat’s liquidity expansion and Bitcoin’s bullishness.

But there is a warning: M2 data is slow. It takes time to collect, update and reflect across economies. Moreover, the impact of increasing liquidity will not immediately hit Bitcoin. Initially, new liquidity flowed into safer assets such as bonds and gold, then into stocks, and later to higher volatility, such as speculative assets such as BTC. This lag is crucial for timing strategies. We can add a delay to this data, but the key remains.

Stable

To address this delay, we shifted to a more timely and stricter metric: Stablecoin liquidity. Comparing BTC with the supply of major stable proteins (USDT, USDC, DAI, etc.) found that the correlation with M2 was even stronger.

Now, tracking only the original value of Stablecoin supply provides some value, but to really gain an advantage, we checked the speed of change, especially on a 28-day (monthly) rolling basis. This change in supply is highly evident in the short-term liquidity trend. When the rate becomes positive, it usually marks the beginning of a new BTC accumulation phase. When it drops sharply, it will be consistent with local top and recurve.

Looking back at the end of 2024, BTC poured into new highs from long mergers as Stablecoin’s growth soared. Similarly, the major 30% decline earlier this year was ahead of a huge negative change in Stablecoin supply growth. This indicator tracks these actions to the day. The latest rebounds to steady supply are starting to show early signs of a potential rebound in BTC prices, suggesting that inflows are reflowing into the cryptocurrency market.

Figure 5: In the past, indicators triggered by liquidity rates above zero have been reliable buy signals.

The value of these data is not new. Crypto veterans will remember that the Tether Printer account on Twitter dates back to 2017, treating each USDT Mint as a signal for a bitcoin pump. The difference now is that we can measure this more accurately in real time and increase the nuances of rate of change analysis. What makes it even more powerful is Intrycecle, and even the intraday tracking feature. With the global M2 charts not updated frequently, Stablecoin liquidity data can be tracked and used in real time in a short period of time, and it can provide a great opportunity to accumulate when tracking positive changes in this change.

in conclusion

Although global M2 growth is consistent with long-term Bitcoin trends, the steady rate of transformation rates provides clarity for intra-cycle positioning. It deserves the place in every analyst toolkit. Using a simple strategy, such as looking for crosses above zero in a 28-day cumulative rate and considering scaling when extreme spikes occur, it works very well and will likely continue to do so.

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Disclaimer: This article is for informational purposes only and should not be considered financial advice. Be sure to do your own research before making any investment decisions.