- Analyst Root highlights record global liquidity levels with a steep upward trajectory.
- Chart shows a strong historical correlation between liquidity and Bitcoin prices.
- Central bank money supply continues an upward trend across major economies.
Bitcoin analyst “The Rational Root” has pointed out that global liquidity is at record highs and climbing steeply. In a short tweet, Root said, “Global liquidity at an ATH, rising steeply.” The chart that Root shared places global liquidity from central banks against the Bitcoin price over a number of market cycles.
Specifically, the chart tracks the total money supplied by central banks, some of which include the Federal Reserve, European Central Bank, Bank of Japan, People’s Bank of China, and others. Notably, the blue area representing global liquidity rises steeply into record highs.
Global liquidity has historically been correlated with Bitcoin price, which is demonstrated by the orange line tracking Bitcoin price for the same time period. The bottom of the chart showing the year-over-year percentage change to global liquidity recently turned positive. Now, with global liquidity at record highs and climbing steeply, according to Root’s analysis, this macro outlook could provide a tailwind for Bitcoin’s price over the coming months.
Crypto analyst Dan Gambardello elaborated on this relationship in a detailed video analysis, stating: “There’s been so much chatter about M2 global money supply and how crypto has followed this trend. When you really chart it… you see in yellow, just really global liquidity increasing, crypto pumps, right?”
Gambardello identified a consistent pattern in this relationship: “When this yellow line starts trending up, there’s kind of been this little gap, right? Basically, what I’m looking at is kind of an anchor point on this chart.” He highlights specific instances where altcoin prices breaking above their 20-day moving averages followed uptrends in global M2 money supply by approximately 22 days.
The analyst noted that this pattern has repeated across multiple market cycles, with altcoins typically beginning their move before the M2 money supply shift, and a break of the 20-day moving average occurring around 26 days later.
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He further explained that this pattern dates back to 2023, showing the same relationships with various time lags of liquidity changes to price shifts from 5 to 26 days. This suggests that global liquidity is generally a leading indicator of cryptocurrency price movement with a lag time of about three weeks.
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