Raoul Pal, CEO of Real Vision and former Goldman Sachs executive, is feeling pretty bullish about Bitcoin and the broader market. According to him, global liquidity is on the rise, and that usually signals good news for investments like Bitcoin.
What Is Global Liquidity?
Global liquidity refers to the amount of capital available for investments worldwide. When central banks lower interest rates, it becomes easier to borrow money, which increases the flow of capital. Governments can also inject more capital into the system, also referred to as “money printing”, making more funds available for investing.
When this extra capital flows into the financial system, a portion of it ends up in assets like Bitcoin. That’s why tracking global liquidity can give us an idea of where markets, including Bitcoin, might be headed.
Liquidity is on the Rise
Right now, global liquidity is climbing, and Raoul Pal’s chart helps illustrate this trend. As liquidity increases, markets typically benefit, although there’s often a bit of a delay.
One key thing to remember is that global liquidity tends to lead the markets by about 10 weeks. This means markets don’t react immediately but catch up as liquidity flows in. Pal also points out that recent actions from the People’s Bank of China aren’t yet reflected in the current data. So, there could be even more liquidity coming that isn’t on the chart yet.
I love the smell of MOAR COWBELL in the morning…
The Everything Code is in full play and this is around the third innings…
Remember – Markets lag Global liquidity by 10 weeks (new China stimulus doesnt even appear on the chart yet so this is prior to todays announcement). pic.twitter.com/Z361udBNmD
— Raoul Pal (@RaoulGMI) September 24, 2024
Bitcoin’s Response to Liquidity
Historically, Bitcoin has tended to react a bit later to increases in liquidity. In 2022, we saw this pattern, and even in 2020, liquidity rose first, with Bitcoin following shortly after.
So far in 2024, liquidity has been relatively flat, but we’re now starting to see it rise again. This could mean Bitcoin is gearing up for another move.
What to Watch For
The next few weeks could be telling. If liquidity continues to increase, we might see Bitcoin follow its historical trend and benefit from this upward movement. Given the patterns we’ve seen before, a more optimistic phase could be ahead for both Bitcoin and the financial markets. October, which is now less than a week away, has historically been a great month for Bitcoin with even 28% gains in 2023.
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