Global Liquidity Updates

Our Global Liquidity Oscillator triggered an intra long signal today.

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In previous similar instances, this has led to a strong upward move in Bitcoin.

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The main factor driving this shift is a sharp drop in the MOVE Index. At the same time, commercial banks continue increasing their security holdings, even as the latest Federal Reserve Bank credit update reflects the Fed's ongoing caution.

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During yesterday’s FOMC, Powell confirmed that QT will continue, though we believe this could end soon as the RRP approaches its bottom levels.

The uncertainty around the election has finally been lifted, and the MOVE Index dropped significantly after the very first day.

You can clearly see the MOVE is way out of its range on this chart, a correction is due.

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While the DXY remains high, FED's 25bp rate cut decision today may be the catalyst that drives it down. Our models are hinting at weakness as well.

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At the same time, Bitcoin is showing clear strength even though liquidity is not the primary driver behind it right now.

Lower MOVE and DXY levels are strong indicators of positive conditions for risk assets.

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Additionally, Global Liquidity model is showing signs of an early upward trend.

It seems the bull market is about to gift market participants an early Christmas gift.

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Will expand more on this once we get new data points on Monday

All Eyes on the Fed as AE GLI Reflects Risky Liquidity Environment

‍The AE GLI has dropped by -0.619% and is currently at $125.764 trillion.

This occurred in tandem with consistent decline of the 3-month rate of change, which reflects caution ahead.

With uncertainty building around election, expect extreme market volatility.

Historically, Bitcoin has acted as a safe haven amid inflation concerns, which is even more relevant now with fiscal deficits ballooning and bond yields rising post-recent Fed actions.

With inflation risks for 2025 are also increasing. A slowdown in liquidity injections by the Fed would be very undesirable, given high indebtedness levels and the strain this could place on the banking system.

Meanwhile, with the MOVE Index elevated, a post-election decline is to be anticipated, which should positively impact global liquidity.

Markets are also, almost completely, pricing in a 25bp rate cut on Thursday.

As mentioned previously, we expect a substantial liquidity inflow from the West, driven by reductions in the TGA and RRP, an end to QT, and banks utilizing various liquidity facilities.