A Rising Tide Lifts All Boats: Bitcoin, Risk Assets Jump With Increased Global Liquidity
A Rising Tide Lifts All Boats: Bitcoin, Risk Assets Jump With Increased Global Liquidity
Bitcoin correlates with high-beta stocks in the recent move upward. Global liquidity is increasing and China leads the way. The Bank of Japan meets tomorrow to discuss policy about defending the yen.
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A Rising Tide Lifts All Boats: Bitcoin, Risk Assets Jump With Increased Global Liquidity
An independent bitcoin rally or a high-beta move? Either way, bitcoin holders are celebrating the latest action to start 2023. Bitcoin has shown some significant momentum and has powered through every key short-term price level across daily moving averages and on-chain realized prices. In fact, every major high-beta play in the market is showing the same strength which gives us more caution than confidence in this latest short squeeze highlighted last week in “Bitcoin Rips To $21,000, Shorts Demolished In Biggest Squeeze Since 2021.”
Ethereum, high-beta semiconductor indexes, stocks like Advanced Micro Devices Inc and NVIDIA Corporation, the Russell 2000 index, high yield corporate debt and even Dogecoin are all coming in hot to start the year. The winner though is the WGMI ETF, which is full of bitcoin mining stocks and is up over 100% in the last 30 days. As much as we would like to see an independent bitcoin move higher, there’s plenty of signs in the market showing the opposite is likely.
We’ve seen a relatively meaningful bounce in the most oversold names of 2022, with a short squeeze and subsequent round of FOMO off the 2022 lows.
Across a basket of high-beta risk assets, the market was historically oversold and had a burst of speculative investment.
This recent risk rally has seen implied equity market volatility drift to new lows as the U.S. dollar continues to weaken over the short-term, National Financial Conditions Index (NFCI) loosens and global M2 money supply contracts at a much slower pace relative to the last few months.
Source: FRED
Source: Bloomberg
The rest of this article is open to paying members only. Here’s what’s behind the paywall 🔏:
Net liquidity and its impact on this upward move in the bitcoin price. 📊
What to watch for with the Bank of Japan’s monetary policy. 💹
How the carry trade may affect both the U.S. dollar and global equity markets. 💵
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