Bitcoin Sprinting Higher

1/? Liquidity Fuels BTC higher

Market liquidity levels are a major driver of assets. Combined with risk levels, they give us a good picture of how far an asset can climb and the support behind it. Last Friday, the crypto space exploded higher on the back of friendly liquidity models and some building risk. Our crypto model, shown here, turned higher to end the week, feeding support for a climb. For Bitcoin, shown in the charts further down, this has broken it out of a 2023 range where sellers have been sitting at 30k and buyers at 25k. The effect has not been as strong for other cryptocurrencies as ETH remains well below the 2000 level.

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So the question is this: with liquidity remaining elevated, like it was in the fall of 2022 but with some cryptocurrencies supporting the move, can BTC continue to move higher? BTC’s moves in the past, in isolation, have been sold once the last buyer arrived. If liquidity turns lower (at the top of a range), that could adversely impact BTC and other crypto’s. Conversely, a liquidity breakout could support a large climb in the asset class. ?

2/ Banks Drop as Market Conditions Weaken

Typically, liquidity is a good thing for the Banks but not if other factors are playing out, like weakening financial conditions and an overly tight Fed which is currently the case. The banks model that we use at Column E is at its weakest point since the spring of 2023, yet we have heard very little on issues within the banking system. It makes me wonder if something could be on the horizon within the sector. Also if as mentioned, liquidity were reverse and move lower, that would prove out to be two tightening points on risk assets and hurt the banks further.

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