Lesson 1
Bitcoin (BTCUSD) as Global Liquidity Proxy
Use BTC (BTCUSD) as a real-time liquidity gauge. Its price action tells you what global liquidity is doing before official data releases. Rising BTC (BTCUSD) on pullbacks = liquidity supportive. Falling BTC (BTCUSD) despite 'good news' = liquidity headwind.
📊 Indicators mentioned in this lesson (click for details):
Bitcoin (BTCUSD) is not just a speculative asset — it's one of the purest expressions of global liquidity in financial markets.
Why Bitcoin (BTCUSD) Tracks Liquidity:
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No Earnings to Muddy Analysis: Unlike stocks, Bitcoin (BTCUSD) has no P/E ratio, no revenue, no guidance. Price is pure supply/demand.
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Global Asset: Traded 24/7 across all time zones. Responds to Fed, PBoC, ECB, BoJ simultaneously.
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High Beta to Liquidity: Amplifies liquidity moves by 2-4x. When liquidity rises 5%, BTC (BTCUSD) might rise 15%.
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Sensitive to Real Rates: High real rates hurt BTC (BTCUSD) (opportunity cost of holding non-yielding asset). Low/negative real rates help.
The Correlation:
Bitcoin (BTCUSD) correlates strongly with:
- Global M2 (GLOBAL_M2) (Howell's liquidity measure)
- Fed Net Liquidity (FED_NET_LIQUIDITY) (WALCL - TGA (WTREGEN) - RRP (RRPONTSYD))
- Inverse of DXY (weak dollar = strong BTC (BTCUSD))
- Inverse of real yield (REAL_YIELD_2Y)s
Timing Lead:
BTC (BTCUSD) often leads the S&P 500 (SPY) by 1-3 weeks on liquidity moves. Its 24/7 nature and global reach mean it processes information faster.
The 'Canary':
If BTC (BTCUSD) is rallying and SPX is flat, liquidity is improving. If BTC (BTCUSD) is crashing and SPX is holding, expect SPX to follow down.
Check your understanding
Lesson Quiz
Quiz Check
Why does Bitcoin (BTCUSD) track global liquidity so closely?
Quiz Check
BTC (BTCUSD) is rallying strongly but the Fed is still doing QT. How is this possible?