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Macro expert Lyn Alden says that macroeconomic conditions hint at further Bitcoin (BTC) rallies over the next several months, but with a caveat.
In a new interview with Natalie Brunell, Alden says that Bitcoin has historically proved to be a decent play on USD liquidity, usually rising in price alongside an expansion of the money supply.
She says that recently, a slight easing of liquidity has helped set the stage for BTC’s rallies over the past several weeks. The macro expert predicts more price appreciation for the king crypto, but says that liquidity trends still weigh down on Bitcoin over the longer term.
“Historically, Bitcoin has been one of the purest liquidity plays. When you look at various measures of domestic or global liquidity, generally when liquidity is rising, it’s pretty good for Bitcoin and when liquidity is falling, Bitcoin is usually going down or sideways. Starting around the beginning of Q4 of last year, some of the liquidity indicators started to bottom and turn back up, at least temporarily.
I think that much like other assets that rallied, I think Bitcoin would have had a rally back then if not for the whole FTX debacle. So that kind of delayed the rally but with that somewhat resolved, and now moving forward, I think Bitcoin and other assets in the ecosystem are kind of having their rally which is really a liquidity rally. Basically, liquidity indicators look okay for the next couple of months, but overall, long term they’re still not in a very good place.”
Alden says it’s possible that a similar scenario to March 2020 awaits Bitcoin at some point before the next bull market, whereby a sudden “liquidity shock” hammers BTC’s price down to retest macro lows before quickly bouncing up.
“I wouldn’t be surprised by something like that, like a sharp retest, but it’s too early to say because it partially depends on what humans do, what Jerome Powell does, what different boss-makers do. And of course, that’s always impossible to predict. But overall, historically, Bitcoin has been very correlated to macro factors, and specifically liquidity.”
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