Bitcoin’s Price May Not Soar Solely on Liquidity Growth
Bitcoin (BTC) might not break out of its current trading range just because of increased liquidity, according to some analysts. They believe that while global liquidity often rises with Bitcoin’s price,this link might not be as strong as many traders assume.
On March 28, Matrixport’s analysts shared their thoughts on X. They noted that when central banks increase the money supply, some of this liquidity eventually finds its way into the crypto market. However, they warned that this doesn’t necessarily mean Bitcoin prices will rise. The relationship between the two lacks a solid theoretical basis.
Matrixport pointed out that the 13-week lag between money supply growth and bitcoin’s price action, which currently shows the best visual correlation, doesn’t have a strong theoretical foundation. they also cautioned that comparing Bitcoin’s price with global liquidity could be misleading. Both are non-stationary, meaning they trend over time, which can distort correlation analysis and lead to inaccurate results.
Without a clear catalyst, Bitcoin’s price could continue to move sideways, Matrixport suggested. They added that, apart from events like last year’s U.S. presidential election, the cryptocurrency has mostly traded sideways. While some traders still see liquidity trends as a key indicator, the analysts argue that crypto-native factors or macroeconomic policies may be more useful.
