The correlation between Bitcoin and global liquidity: an 87% match indicates strong growth potential
The resilience of Bitcoin and tech stocks is not determined by corporate reports or news headlines. The key driver is the total amount of money in the global financial system. The current calm in the crypto market is not a sign of a model collapse, but a natural phase of consolidation.
Macro economist and founder of Global Macro Investor, Raoul Pal, presented a compelling analysis showing that Bitcoin's correlation with global liquidity is 87%. For comparison, the Nasdaq index reaches 97%. The difference between these assets lies only in the amplitude of fluctuations. Bitcoin, being a younger and more volatile instrument, deviates more from the liquidity trend, driven by trader emotions and network immaturity.
Liquidity Over News
Pal argues that most investors mistakenly look for price drivers in corporate earnings or news events. However, both instruments—Bitcoin and the Nasdaq—clearly follow the money supply. The difference is that the first cryptocurrency overheats and then sharply cools down, creating an illusion of a broken mechanism for inexperienced participants.
We are currently observing a phase of calm. However, according to the expert, this is not a signal to exit, but rather an entry point. The asset is behaving in its usual manner, and its current decline relative to liquidity highs is temporary.
Forecast of Currency Devaluation for Years Ahead
At the core of Pal's calculations lies the concept of The Everything Code. According to it, the volume of money directly depends on currency devaluation. Interest payments on government debt are already known today and lead the dynamics of the money supply by about three years. The chain of cause and effect looks like this:
- The volume of debt and the costs of servicing it are known in advance.
- The need to roll over loans forces authorities to print new money.
- The growth of the money supply leads to an increase in risk assets with a delay.
Pal predicts that if global liquidity continues to grow (which is inevitable due to currency devaluation), both assets will rise along with it, but Bitcoin will do so more strongly. The current cooling phase is more of an entry point than a reason to exit. However, correlation with the past does not guarantee the future: Pal's model is a forecast, not a fact.
My expert opinion: Bitcoin's high correlation with liquidity confirms its status as a macro asset sensitive to global money flows. However, investors should remember that the 13% divergence is a zone of uncertainty where regulatory risks and retail sentiment play a decisive role. Buying during a calm period is reasonable, but with a clear understanding of the time horizon.