In our latest macro update we dove deep into the situation with japan and fears of a slowing US economy. Our view was that the quick selloff in risk assets was a bump in the road caused by an unwinding of leverage and the short volatility trade.
We also looked at US and global liquidity and financial conditions and came to the conclusion that the trend was for an increase in liquidity and a loosening of financial conditions. Up to now that view has proven to be very accurate as we have seen the fed cut interest rates by 50 basis points, china cut interest rates but 10 basis points, and the bank of japan leave their interest rates unchanged.
Short-Term Holder Realized Price
Bitcoin has made it back above STH Realized Price, and is showing signs of strength. In the chart below, the red line represents the STH realized price, which you can see has acted as support at the bottom of the range.
Global Liquidity
Global liquidity has broken out of its stagnant phase and is heading higher. The PBoC – Central Bank of China – has begun stimulating the Chinese economy which is supportive of a new bullish phase for global liquidity.
The chart below provides a more zoomed-in view of global liquidity and Bitcoin. Global liquidity has a roughly 3-month lead on Bitcoin – this is represented by the red line in the chart.
Liquidity broke higher in late July and it is now late September. As long as this highly correlated relationship between Bitcoin and liquidity continues, we’re looking at significantly increasing probabilities of a Bitcoin breakout as we end Q3 and move through Q4.
Quantitative Systems and Current Positioning
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