Global Liquidity Hits Record—Bitcoin's Next Move Could Shock Markets

Bitcoin has jumped 40% since April 10, driven by a major breakout in global liquidity.

Global liquidity has reached a record high, and this could have a surprising impact on Bitcoin's next move, according to Bloomberg analyst Jamie Coutts.

In a recent analysis, Coutts pointed out that the world's smallest cryptocurrency has surged by 40% since April 10. This rally began when his Global Liquidity Aggregate (GLI) index broke out to new all-time highs for the first time in three years.

What sparked this liquidity build-up? A rapid decline in the U.S. dollar was the main driver, kicking off a significant shift in global capital flows.

Since hitting breakout levels, GLI has advanced by an additional 2%. This aligns closely with Bitcoin's recent Q2 rally from the $48K range, where it encountered resistance throughout 2023.

"This price action is historically consistent with expanding liquidity regimes. For every 1% increase in global liquidity, we could see BTC experience price gains of >20%. But over time, the correlation diminishes as new drivers take over."

Bitcoin's Sensitivity to Liquidity Remains High

While the correlation between Bitcoin and liquidity lessens over time, the crypto asset still reacts sharply to large-scale liquidity injections into the system.

The chart shared by Coutts shows a close alignment between the GLI (white line) and Bitcoin's price (orange line), particularly during periods of macro expansion. It showcases how quickly crypto prices can move when liquidity is surging.

However, Coutts cautions that this model explains the ongoing capital flow into Bitcoin but doesn't factor in what he calls the inevitable "oh shit" moment—a global panic-driven rush into BTC.

"This phase, which will see an extraordinary widening of the market breadth as traders get desperate and institutions realize they're out of the trade, isn't here yet. But it’s coming."

As liquidity conditions improve and capital surges back into risk assets, we're likely to see extreme shifts in sentiment.

"It will be best of times, it will be the worst of times," adds Coutts, highlighting the double-edged nature of rising liquidity. It fuels economic growth but also amplifies risk-taking behavior and emotional trading cycles in markets.

With liquidity hitting fresh highs and Bitcoin reacting accordingly, market participants may be entering a highly reactive and fast-moving phase—one where opportunity and volatility go hand-in-hand.