Rising Liquidity Trends: Why It’s Not Time to Call a Top on Bitcoin

Not the time to be calling for tops

‍Despite some "headwinds" for Bitcoin, sentiment remains positive and interest from big institutions and countries is likely to continue growing as the coming US administration is very pro-crypto.

The central bank minutes reveal discussions of a five basis point cut on the ON RRP, which could likely be interpreted as a signal for more liquidity in the outlook.

In our view, this indicates that the Fed is signaling a desire to end QT and move back to QE.

While there are concerns about the DXY hovering at high levels, we mentioned in a recent post that its momentum is likely to slow down.

This may be setting up for a pullback to test its previous monthly open at the $103.86 mark - which would potentially drag the MOVE Index lower as well.

That path would be very positive for risk-on assets, even if it turns out to be a temporary path for the DXY.

Looking at the Treasury General Account which is currently floating between the $800bn and $700bn range, we remain positive about a decrease in Q4 and Q1 of next year.

On the macroeconomic outlook there is a high likelihood that both the ECB and the Fed will cut rates before the end of 2024.

TLDR: as we look ahead, we continue to see liquidity rising further into '25.

As a heads up - we have been long since our model turned bullish back in September and with a confirmed bullish Global Liquidity oscillator, our outlook remains positive.Coming to our data, Global Liquidity has seen a decrease of 250bn, which is a decrease of 0.2%.

The 3m RoC remains above the 12m which is a good sign for continued liquidity momentum.