Thank you for your very interesting notes Lyn! ,🙂 And what are your expectations for global liquidity for 2023 and 2024?

Not great in the near term. The combination of the Fed doing QT, the Treasury shifting towards longer-duration bond issuance, and China running tight fiscal policy, are all liquidity negative. I think we grind for a while until something snaps in the Treasury market or something adjacent, and then we do the next leg up in liquidity. Liquidity bottomed back in Oct 2022 right after 1) the UK bond market outright broke and 2) the US bond market was really wobbly (bad liquidity, high volatility). That was fixed by the Treasury draining its cash account and shortening the duration of its bond issuance.

Yes but what about *short sighted metric* ? How do you explain that, huh?

Big bummer for those who expecting some action for the halving event in 2024..... So this time *is* different..... We will see. For me it does not really matter. Strong hands.

So.. it’s prime time to stack sats, given that the Fed and ECB are likely to eventually go back to cutting the rates come ‘unknown and variable lag’ hits the fan?

I think there’s bound to be some action some time after halving either way. E.g., a self fulfilling prophecy. But we do need to keep the macro view in mind, as that determines where the equilibrium of reduced-supply bitcoin would be.

By the time we get to mid 2024 the liquidity situation could be a lot different. Too early to say on timing now. Could have the halving followed by better liquidity, and thus have another one of those rocket fuel bull runs into 2025.

there is more to economy than money if tomorrow every single person with over 120 IQ was executed you financial types wouldn't know what the effect on economy would be i can tell you though - it would result in human extinction within 10 years this is more or less the path we're on anyway

I think that is probably about right for how much of the supply of dollars that they have to burn before the money gets back into sync with commodity demand. And yep, this time is different, previously on logarithmic scaling it has looked like bitcoin has been wilting, but that's just because the economy is tanking. A rocket fuel powered race for dollar hedges once the spigot starts up again seems very likely indeed.

Of course "I Love Bitcoin's Volatility" by Daniel Krawisz

I Love Bitcoin's Volatility | Satoshi Nakamoto Institute

Those who worry about Bitcoin’s volatility fail to understand what it actually means for Bitcoin.

The last ATH was a good while after the halving. So I’d expect it to break 69k late 2924 at the earliest or some time in 2025.

Dear US FED. Please print more money. 😁 View quoted note →

Thanks for the insights, Lyn! And for everyone else like me who needed that last paragraph elaborated on: https://chat.forefront.ai/share/df243096-8769-4134-be66-5ae37e19c10c

Ye of little faith

Stack sats and stay alive. Timing is impossible because if we knew ahead of time, that in itself would change the timing, and we wouldn’t know.

US elections next year too (probably UK also)...

do you have a top 3 possible catalysts for the crash that can finally break the camel's back? there are so many piling up, china slow down, Ua war, BoJ, CRE...

When we think about global liquidity, am I right in saying China's M2 is greater than the US? And, isn't China encouraging loans and growth in money supply at present?

What could be very tough to analyze in bitcoin is that, while we’re living in a very tight and low liquidity global market, those with liquidity or things to sell/swap, once they identify as NEEDING bitcoin in the face of growing economic, USD, global asset decay, all bets are off. Do we know what happened when oil became a commodity, regardless of global liquidity? I guess we also can have a tough time comparing bitcoin to any other money/commodity situation (gold perhaps, but trying to break down the history of when gold was deemed valuable and what happened there we just don’t have data for going back hundreds and hundreds of years).

We know global liquidity will keep going up in the long run to keep the fiat ponzi alive. If you have money in tbills or a money market fund you are printing money right now. Stimulus for the rich. At some point this could override the decrease in private lending.

why do long duration bonds hurt liquidity more than short duration bonds?

Agree but sometimes breaking important technical levels can lead to outside demand as well. Right now there’s no urgency for buyers until 32-33k breaks

Does global liquidity just happen to match up well to the 4 year halving cycles? It’s pretty wild that the halving and liquidity coincide like this, and that it’s easy to see a scenario where in the second half of 2024 and into 2025 sees another big spike up in liquidity.

I guess moral to story is - don’t be on the other side when the coiled spring - “sprungs” hard upward!

@Lyn Alden is the effective feedback loop of liquidity on BTC price something like this?

What hypothetical events do you see as breaking the dam? More Failed banks? A failed treasury auction?

Money market funds can’t purchase long bonds so the money that buys duration often comes from reserves that people are holding in banks

This is another way of stating that money unencumbered by debt (gold and now bitcoin) tracks the real interest rate inversely.

Gold vs. Real Yields - Updated Chart | LongtermTrends

This chart plots gold prices and real yields. Gold and real yields are negatively correlated. In other words, when real yields go down gold goes up.

You are the best Lyn...hope you are enjoying Egypt.

Liquidity cycles have averaged around 3 years. After some halvings, bitcoin price shot right up, and in others it was a slower build up. A lot of that is about how closely the liquidity cycles lines up with the halvings.

Yes, this.

If M2 stays consistent for a period of time, it would seem that Bitcoin should as well.. I agree with you regarding this. How M2 can be manipulated has to be looked at as well.. How does the gov't monetize the continuing deficit without printing and dispersing of cash?

People saying that it hasn't worked as a hedge against #inflation are wrong in my opinion because they are thinking too short-term. The general direction of travel for #bitcoin is to be a hedge, but over the short term, it can have huge drops. In this case, I think it's more about the destination than the journey.

So basically we should stay humble and stack sats?

The only evidence that we have about IQ is that it gets higher. So where do you come to your conclusions? Whats the scenario that we go extinct?

💯

What does this mean for LATAM countries and African countries that have already devalued currencies and also at ATH in those countries. But because their local fiat currency isn't as strong as the dollar,there really is no much dent. Paper #bitcoin is a problem

ตั้งแต่ช่วงปี 2013/2014 ราคาของบิตคอยน์ได้วิ่งตามอัตราการเปลี่ยนแปลงของการเจริญเติบโตของอุปทานเงินโลกในความหมายอย่างกว้าง (M2) ในหน่วย USD มาเสมอ พูดอีกอย่างก็คือ จากมุมมองของนักลงทุนมหภาค (ซึ่งมีความแตกต่างอย่างชัดเจนกับกลุ่มผู้ใช้งานเครือข่าย) มันคือสินทรัพย์ที่เหมาะสำหรับการเล่นกับความเปลี่ยนแปลงของสภาพคล่องโลกมากที่สุด มันคือเครื่องมือป้องกันความเสี่ยงจากเงินเฟ้อที่เกิดจากการพิมพ์เงินของโลก ไม่ใช่เงินเฟ้อจากดรรชนีราคาสินค้า ยิ่งไปกว่านั้น ความแข็งแกร่งของดรรชนีเงินดอลลาร์เมื่อเทียบกับสกุลเงินอื่น ๆ ยังส่งผลต่ออัตราเงินเฟ้อทางปริมาณเงินของโลกอย่างมีนัยสำคัญ ดังนั้น เพื่อที่จะทำการวิเคราะห์ราคาในกรอบเวลาที่สั้นลงมาสักหน่อย (ยกตัวอย่างเช่นพวกคนที่ออกมาบอกว่าราคาจะทำ ATH ก่อนฮาล์ฟวิงครั้งต่อไป) เราจำเป็นต้องมองถึงอัตราเงินเฟ้อเชิงปริมาณเงิน และสภาพคล่องของโลก เนื่องจากนั่นคือแหล่งที่มาของอุปสงค์ภายนอกส่วนใหญ่ ตอนนี้ บิตคอยน์เป็นเหมือนกับสปริงที่หดตัวอยู่ในทางฝั่งอุปทาน (พวกสิงห์พนันออกไปกันหมดแล้ว และเหรียญก็ย้ายไปอยู่ในมือที่แข็งแกร่งของผู้ถือระยะยาว) แต่ปัจจัยทางฝั่งอุปสงค์ (ซึ่งจะส่งผลต่อราคา) ยังเป็นเรื่องของสภาพคล่องโดยรวมของโลกเสียส่วนใหญ่ >>เสริมต่อจากลิน หลังจากฮาล์ฟวิง แรงอัดของสปริงในฝั่งอุปทานจะรุนแรงขึ้นอีก แต่ตราบใดที่สภาวะทางสภาพคล่องของโลกยังย่ำแย่ เราจะยังไม่เห็นอุปสงค์ในปริมาณที่มีนัยสำคัญ และปัจจัยระยะสั้นในตอนนี้ ไม่ว่าจะเป็นกรณีของการผิดนัดชำระหนี้ และการประกาศล้มละลายของบริษัทผู้ลงทุนในกลุ่มอสังหาฯ จีน ไปจนถึงการขึ้นอัตราดอกเบี้ยอย่างต่อเนื่องของเฟด ล้วนเป็นปัจจัยที่ส่งผลลบต่อสภาพคล่องทั้งสิ้น จนกว่าจะมีการแตกหัก คงยากที่จะเห็นอุปสงค์จากภายนอกไหลเข้ามา แต่เมื่อมันมา มันจะมาแบบถ่าโถม ทันที รุนแรง และรวดเร็ว View quoted note →

Great thread! Can you help explain how central bankers might fight inflation and exorbantly rising home prices/CPI while also lowering interest rates? Is this practically possible? In a general look, I can't see rates falling/QE anytime soon. I'm also assuming that mass liquidity is mostly a product of QE/Interest rates. There was so much QE given over the past decade and pandemic stimulus.

View quoted note → 这仍然是与比特币长期均线价格的相关性，不是因果关系。

Just looking at these graphs makes me think that they’re going to find themselves between a rock and a hard place in not too distant future!

Nice chart!

You can feel the strong hands especially if you try to buy BTC via p2p physically theese days. You'll have to pay 5-7% on top. Seems that there are different realities in price theese days. Don't know if the fear and greed for BTC is still usefull.

Have you got a release date for your book yet? @Lyn Alden

The relationship is fairly elastic, too, so that's a strong argument for buying dips if you think monetary expansion will continue.

Doesn’t SP500 also follow M2 Money Supply?

Doesn’t SP500 also follow M2 Money Supply?

1. **Correlation ≠ Causation**: Even if the S&P 500 and the M2 Money Supply have moved in tandem over certain periods, it doesn't necessarily mean one causes the other. There could be third factors influencing both or the correlation could be coincidental. 2. **Potential Mechanism**: An increase in the money supply can lead to lower interest rates, which in turn can make borrowing cheaper for companies and consumers. Cheaper borrowing can stimulate economic activity and boost corporate profits, which could potentially drive stock prices higher. Additionally, lower interest rates can make bonds and other fixed-income assets less attractive relative to stocks, leading to increased demand for equities. 3. **Inflation Considerations**: An increase in the money supply can also lead to inflationary pressures. While in the short term, inflation might not have a direct negative impact on stock prices, prolonged periods of high inflation can erode purchasing power and impact corporate profitability. 4. **Other Factors**: The stock market is influenced by a myriad of factors, including but not limited to corporate earnings, geopolitical events, technological innovations, and investor sentiment. The money supply is just one of many factors that can influence the direction of stock prices. 5. **Empirical Observations**: Over the past several decades, there have been periods where the growth of the M2 Money Supply and the performance of the S&P 500 seemed to correlate. Especially during periods of aggressive monetary policy interventions, such as the Quantitative Easing programs post the 2008 financial crisis, there has been a noticeable increase in both the money supply and stock market valuations. 6. **Long-Term vs. Short-Term**: While there might be short-term correlations, over longer periods, the relationship might not hold as consistently. Factors like technological advancements, demographic shifts, and changing global dynamics can play a more dominant role in shaping stock market performance over the long run.

Just saying, People are only staying with monetary inflation if they are invested with Large ETFs.

So it actually is a hedge against inflation then.

You know the old adage. This is good for bitcoin.

Just curious about two things 1. As the best asset , what’s your opinion of how it prevents crimes like money laundering? 2. If it’s to be used as currency or whatever you name it, what do you suggest to avoid its involvement in Bubble assets? Btw, due to my shallow knowledge and understanding of economics at Macro and Micro level, I don’t quite understand the logic in your post. My bad 🤦🏻‍♀️

Lyn is the US bond market not really wobbly now?

This is exactly what that Rand Paul (macro guy) was saying on his video about BTC the other day!