The Next 3 Months Will Be Massive for Bitcoin.

What if I told you that there is one macro force that has appeared before every major move Bitcoin has made in the last 10 years? A macro variable that has showed up before Bitcoin's 5,000% rally from 2016 to 2017, again before the 1,000% surge from 2020 to 2021, and also right before the vicious 70% crashes in 2018 and 2022. It's the same force that every investor knows exists, but very few actually know how to use it. It's called global liquidity, and believe it or not, it's flashing yet another major signal today, telling us where Bitcoin could be by August of this year. We can see what global liquidity looks like through this chart showing something called the global M2 money supply. This reflects the total liquidity that's provided by 20 of the world's largest central banks. And right now, it's breaking out to the highest level on record. Now, this global liquidity is heavily influenced by what global central banks do with their interest rate. When central banks ease monetary policy by cutting interest rates, borrowing becomes cheaper. That encourages lending and spending, which leads to more money circulating in the financial system, and this mechanically results in an increase in the M2 money supply. For example, if we look at the money supply in the United States, we see it recently made a peak right here in 2022 and began declining. If we put the federal funds rate or the central bank's interest rate on top, we see that this decline in the U.S. money supply perfectly coincided with the period when the Federal Reserve was raising its interest rates and making borrowing more expensive. But starting from August of 2023 onwards, the Federal Reserve paused its interest rate hikes and then gradually shifted towards a rate cuts. As you can see, U.S. money supply began rising and has recently hit new all-time highs. This principle applies not just for the U.S., but for central banks around the world. Today, global central banks are cutting rates at one of the fastest paces in history, with 64 rate cuts globally in just the last six months. This is even faster than what we saw in 2024. The last time there were these many global central bank rate cuts was in 2020 in response to the pandemic. So exactly how does this impact Bitcoin? Well, when you put the price of Bitcoin on top of the global money supply, the relationship becomes quite clear. While it's not a perfect one-to-one correlation, there is a very clear connection. Bitcoin tends to move in the same direction as global liquidity. Take 2020, for example. Following the pandemic, central banks around the world responded with rate cuts, leading to an explosion of the money supply, and Bitcoin went from under $5,000 to nearly $70,000 within just a year. In 2022, global liquidity fell as global central banks were generally raising their interest rate, and that shift coincided with a downtrend in Bitcoin as price fell from its peak of $70,000 to $15,000. So when liquidity expands, risk assets like Bitcoin tend to rise, and when it contracts, they struggle. Now, Bitcoin has a correlation coefficient of 0.51 with the global money supply. A correlation coefficient measures how closely the movement of two variables track each other. Hypothetically, a correlation of 1 would mean the two variables are doing exactly the same thing, and a correlation of 0 would suggest they have absolutely no relationship at all. A correlation coefficient of 0.51 is actually the highest correlation out of all other financial assets, including gold, the S&P 500, emerging markets, treasury bonds. So while the relationship between Bitcoin and the global money supply is not perfect, it is definitely one of the factors that influences Bitcoin's price the most. And there is a fundamental reason for this. Bitcoin is not tied to economic fundamentals like earnings or cash flows or dividends. It's an asset that thrives when investors are seeking risk and chasing returns, something that they tend to do more of when global liquidity is abundant. More capital in the financial system means more money looking for a home, and Bitcoin is often one of the destinations. And because Bitcoin is so globally accessible and not bound by national borders, it responds not just to U.S. liquidity, but to capital flows around the world, which creates this high level of sensitivity to the global money supply that most assets don't have. So in other words, even a modest increase in global liquidity can have an outsized impact on Bitcoin's price. But exactly how big of an impact can it have today? Well, so far we've looked at the absolute level of the global M2 money supply. But what really matters for financial markets is something called the rate of change, which tells us how quickly the money supply is rising or falling. Because investors don't just react to current conditions, they adjust their positioning based on how quickly those conditions are likely to change. In other words, they don't just respond to where global liquidity is today, they respond to how fast it's expanding or how fast it's contracting. This chart shows the year-over-year change in global liquidity. When this line is rising, it means the global money supply is expanding. And if we add the price of Bitcoin on top, we can see historically those periods have coincided with the most aggressive rallies on Bitcoin. Research shows that Bitcoin has an 8.95% sensitivity to changes in global liquidity, which means for every 10% increase in global M2 growth, Bitcoin has historically climbed 90%. That type of high sensitivity explains why Bitcoin tends to perform extremely well when liquidity is rising and experience very tough bear markets when global capital tightens. Now, if we zoom in, we can see that global liquidity has been expanding steadily over the last few weeks. Now, at first, Bitcoin was not responding. It stagnated around its all-time high. Now, this actually allowed us to take a position on Bitcoin at bravosresearch.com. And since then, Bitcoin has begun to break out. And in our opinion, this is just the beginning. Now, there have been moments throughout history where the relationship between Bitcoin and global liquidity has broken down. For example, during COVID-19 or during the FTX collapse, the correlation between Bitcoin and global liquidity actually briefly dropped into negative territory, meaning that Bitcoin was trading in the opposite direction to global liquidity. So this is the risk to the trade that we're taking on Bitcoin today, that we see some kind of event that triggers a breakdown in the correlation, which leads Bitcoin lower despite rising global liquidity. So let's assume that we don't see the end of the world and that Bitcoin stays correlated to global liquidity. What type of price action should we expect? When we take a look at this chart of Bitcoin with the global money supply and shift forward of the global liquidity line by three months, something very interesting happens. Bitcoin doesn't just follow the direction of liquidity. It tends to follow it with a lag. This is a relationship that we highlighted back in April of this year when Bitcoin was still trading at around $80,000 and many were calling for a bear market. But the global money supply was telling us that Bitcoin would bottom and move higher. And that's exactly what happened. Today, if the relationship continues to play out, global liquidity is suggesting that Bitcoin could be on track to rally towards $170,000 by September. Now, again, Bitcoin's correlation to the global money supply is not perfect. It sits at 0.51, not at one. So we have to take this target as a range in both time and price, giving us an approximate target range of $160,000 to $200,000 by the end of the year, depending on how hot the crypto market gets. This is one of the reasons why we currently have an active position on Bitcoin on our website. And this is despite the fact that we have a cautious view on the stock market today. In 2024, our cryptocurrency trades delivered some amazing returns, like a 30% gain on Bitcoin, a 63% gain on Solana, and an 83% gain on Ethereum. And the trades that didn't work out were closed with less than a 5% loss. Make sure to sign up to our service using the link down below. Thank you for watching.