Macro & Liquidity

Macro is crypto. Crypto is macro. The most important KPI for crypto is liquidity.

It took me multiple podcasts, articles on how modern economies function to understand this, and ever since that I have started viewing everything from a different lens.

Lets understand what Liquidity means in financial context:

Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. Basically money flowing around in the system. Think of it like a pool of water, the bigger the pool the easier it is to add water or take water without affecting the level of water in the pool.

It’s important because every financial transaction needs a buyer and seller and if there is enough liquidity then the transaction can take place without rapid movements in price which ensures efficiency.

With a risk asset like Bitcoin things get interesting: When liquidity is rising, Bitcoin is rising. When liquidity is falling, Bitcoin is falling.

The logic is simple:

More money in the global system can encourage spending on perceived 'risk assets' such as Bitcoin. This happened to us in COVID, where handouts were given out to people, businesses hired like crazy because of low rates on debt and everyone just wanted to spend more.

Even if you zoom out and start to look at the below exponential trend in liquidity since 2008 — driven by debt and monetary debasement (which is papering over major demographic shifts, falling labor force participation rates, and lower productivity) you might come to realize that holding onto assets or even an index is going to do the trick because given the global financial circumstances, the liquidity sooner or later will rise.

Till then, hold on to your dear assets

The global cryptocurrency market cap today: $2.59 Trillion

Daily change: 0.34% | Yearly change: 131.21% 

Bitcoin (BTC) is the largest cryptocurrency with a market cap of $1,310 Billion.

Weekly change: 4.47% | YTD change: 56.64%

Another important metric is Bitcoin dominance which can be used as a rough indicator of the relative strength of Bitcoin versus other cryptocurrencies.

Historically, Bitcoin leads the rest of the crypto market off the cycle lows and into the next bull market. BTC dominance increases early in cycles and decreases later as the wealth effect sets in and long-term holders rotate into altcoins for more upside.

Bitcoin dominance: Current Year: 54.15% | Last year (June 2023): 49.76%

Major Token - Performance

The market went down last week but Greed levels remain high even as the global economy is unsure of what is going to happen next

Note: The data used is based on metrics like Volatility, Surveys, Bitcoin Dominance, Social and Google Trends. Source: Coinstats

Let's have a look at Ethereum supply changes post its merge to a PoS blockchain from PoW.

The significance of the chart - understand how the supply of Ethereum is decreasing post the merge, which means “deflationary economics” for the Blockchain. In long term gives a sense of where the supply is headed

Supply change since merge POS -363,149 ETH

The graph highlights POS issuance since the merge. Impressive numbers, look super bullish for ETH long term given the supply of ETH is not growing as before

Mass Adoption Would Ruin Crypto. Keep It a Niche There is an unavoidable tension between the aims of decentralization and onboarding everyday users.

Donald Trump Says He Wants All Remaining Bitcoin to Be 'Made in USA' Early Tuesday Trump met executives from Nasdaq-listed bitcoin mining firm CleanSpark Inc. and Riot Platforms.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research Crypto is Macro. Macro is Crypto.