When Will Bitcoin (and Risk Assets) Bounce?

‘The dog that didn’t bark’

Our conclusion, upfront, is that risk assets, including crypto prices, may fall more before they rebound later in the year. There are some worrying signs, lots of uncertainty among investors and many policy imponderables.

The Backdrop

Money moves markets. Bitcoin is a great barometer of Global Liquidity, which as the first chart shows tends to lead by around three months. It may be the most liquidity-sensitive asset on the planet and latest data do show a small revival in Global Liquidity, but, as the pie chart shows, Bitcoin’s price is also affected by other factors.

Playing a large role is investors’ risk appetite, in other words risk-seeking behavior. A ‘risk off’ regime puts additional pressure on Bitcoin. Combined with Global Liquidity, these two drivers account for around two-thirds of the systematic influences on BTC$. The other factors we have identified are related to gold bullion.