Thu, September 26, 2024 at 23:04

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I have some intriguing news about Bitcoin's performance and its correlation with global liquidity.

  • 
• Annie

  • Oh, that sounds interesting!😊 Can you tell me more about this correlation?

  
• 

  Kang-hoon

  • Certainly.

  • According to a report by renowned analyst Lyn Alden, Bitcoin has an 83% correlation with global liquidity.

  • This means Bitcoin tends to rise when liquidity expands and corrects when liquidity contracts.

• Annie

  • Wow, that's quite a high correlation.

  • How was this measured?

  
• ADward

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• 

  Kang-hoon

  • The analysis used the M2 supply, which includes cash, bank deposits, and short-term savings instruments.

  • Bitcoin had the highest average correlation with liquidity on a 12-month basis compared to other assets like gold and equity indices.

• Annie

  • I see.

  • So, Bitcoin is highly synchronized with liquidity.

  • How consistent is this correlation over different time frames?

  
• 

  Kang-hoon

  • From May 2013 to July 2024, Bitcoin's price had a high correlation of 0.94 with global liquidity.

  • However, this correlation weakens in shorter time frames, averaging 0.51 on a 12-month basis and 0.36 on a six-month basis.

• Annie

  • That makes sense.

  • Are there any major events that can break this correlation?

  
• 

  Kang-hoon

  • Yes, the correlation can be broken during major events or extreme market conditions.

  • For instance, the Mt.

  • Gox hack and the TerraLuna collapse caused significant disruptions.

• Annie

  • Interesting.

  • What about on-chain data?

  • Does it play a role in this analysis?

  
• 

  Kang-hoon

  • Absolutely.

  • On-chain metrics like the 'Bitcoin 1+ Year Hold Wave' and the market price to realized value Z-score (MVRV Z-score) also influence Bitcoin's liquidity correlation.

  • These metrics help provide a more comprehensive understanding of Bitcoin's price cycle.

• Annie

  • Can you explain a bit more about these on-chain metrics?

  
• 

  Kang-hoon

  • Sure.

  • The 'Bitcoin 1+ Year Hold Wave' metric shows that the percentage of investors holding Bitcoin for more than a year decreases in bull markets and increases in bear markets.

  • The MVRV Z-score indicates whether Bitcoin is below fair value when the market price is equal to or slightly lower than the realized price.

• Annie

  • Got it.

  • So, combining global liquidity analysis with these on-chain metrics gives a clearer picture?

  
• 

  Kang-hoon

  • Exactly.

  • This combination helps investors assess Bitcoin market cycles and predict future price movements more accurately.

• Annie

  • That's very insightful.

  • How do you think this news will impact the market?

  
• 

  Kang-hoon

  • In my opinion, this is positive news.

  • 

  • The strong correlation with global liquidity suggests that as liquidity expands, Bitcoin's price is likely to rise.

  • This could attract more investors looking for assets that perform well in such conditions.

• Annie

  • Thank you, Kang-hoon.

  • This helps a lot with my investment decisions.😊

  
• 

  Kang-hoon

  • You're welcome, Annie.

  • I'm glad I could help.

  • Have a great day!

  • Upon comprehensive consideration, this news is perceived as a 😍Bullish.