Real Vision CEO Raoul Pal thinks Bitcoin’s (BTC) rally is all about the global liquidity cycle.
In a new analysis, the former Goldman Sachs executive lays out how he believes crypto is tied into the traditional macroeconomic framework.
“Below you will find a chart of ISM (our preferred barometer for the business cycle) versus what Bitcoin is currently discounting in terms of where we are in the cycle. As you can tell, the two are very closely correlated and Bitcoin is even leading as you would expect…”
The ISM manufacturing index is an indicator of US economic activity.
Pal also looks at global M2, a money supply metric that measures peoples’ cash, checking accounts, and other types of deposits that are easily convertible to cash.
“The fact that Bitcoin has a lead over ISM is being driven by the turn higher in the liquidity cycle, which bottomed last year and continues to rise in year-on-year terms. This is why we have seen such a face-ripping rally in crypto and tech stocks year-to-date: it’s all down to a turn higher in liquidity…”
Pal believes the liquidity cycle bottomed in October 2022 and says his models “suggest an upward trajectory well into 2024.”
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