When will liquidity flood the market? Thanks to liquidity, more money coming in usually means higher cryptocurrency prices. However, the current market is still dry, and there is no trace of the "uptide" in 2021. I looked to macro expert CG ( @pakpakchicken ) for some clues.
Affected by policy
@pakpakchicken spends hours every day tracking policy changes, "Policy drives liquidity, liquidity drives assets, assets drive GDP... etc."
His conclusion: The biggest risk stems from the upside.
@CryptoHayes and @RaoulGM agree.
an overlooked insight
@pakpakchicken pointed out that there is little discussion about the expectation that the dollar may weaken.
He predicted there will be a concerted move to weaken the dollar going forward, a move that could increase liquidity.
As background, a look back at the events of 1985
The policy context around 1985 will help understand the mindset of policymakers:
- tight monetary policy
- high long term interest rates
- Strong dollar (exploring the “milkshake theory”)
- high deficit
unprecedented volatility
As volatility season approaches, @pakpakchicken predicts extreme volatility.
This will be driven by the need for the United States to repay its $35 trillion debt.
Why volatility is a good thing
@pakpakchicken believes volatility is not a flaw, but a desirable characteristic for profitability.
A lot of money is made in short bursts.
Sideways movements will throw ordinary investors out of the game, and the market will rise when you give up.
The impact of debt on cryptocurrencies
To manage its massive debt, the U.S. may increase liquidity to devalue its currency.
This will ensure that debt rollovers are manageable, without which yields could spiral out of control.
Larry Fink's point of view
BlackRock CEO Larry Fink said of the national debt :
No matter how much the United States increases taxes or cuts its debt, these measures will not be enough to solve the national debt problem. Therefore, he stressed that building new infrastructure is crucial. He believes that by building new infrastructure, it can not only promote economic growth, but also lay the foundation for future development.
CG ( @pakpakchicken ) believes that while the U.S. dollar still maintains its value, institutions will tokenize all assets.
Macro update on CG (late Q2)
At the end of the second quarter, US weekly liquidity support reached US$2 billion per operation, and QT decreased from US$6 billion per month to US$2.5 billion.
U.S. policy has increased the issuance of short-term bills, and China's RMB may depreciate.
China’s multi-trillion yuan liquidity growth could be a boon for cryptocurrencies, with currency devaluation looming as goods, services and asset values deflate, all factors that point to a potential bullish outlook for the second half of the year.
U.S. Treasury repurchase
Weekly liquidity support buybacks have surged to $2 billion since the U.S. Treasury buybacks began on May 29, an injection of liquidity that could amplify cryptocurrency prices during a chaotic election season.
CG ( @pakpakchicken ) thinks the second half of 2024 could see an uptick.
Exponential Summer
@pakpakchicken is committed to promoting cryptocurrencies as a leading asset class. However, he emphasized: “Markets can remain irrational longer than you can remain solvent.” A future of global liquidity surges is on the way…
narrative fatigue
CG ( @pakpakchicken ) emphasizes that narrative understanding is key.
Narratives drive markets until the value of narratives is exhausted.
The CPI/inflation narrative is fading; recent reports lack punch.
The next mainstream focus
A rate cut comes earlier than expected as bank reserves falter and jobs take center stage.
TLDR: "Hold for the long term"
The most painful market moves
With the convergence of macro forces, CG is expected to see "the most painful market trend" according to market rules.
PS: "The most painful market trend" is a concept in the financial market. Literally translated as "the most painful", it refers to the price change path taken by the market in a specific period. This path usually gives most investors causing the greatest pain and distress.
The logic behind this concept is that the market will often choose price movements that magnify the losses of most investors. The driving forces behind this market behavior include market manipulation, the strategies of institutional investors, and the inherent supply and demand relationship in the market.
What are the signs leading to the “most painful market move”?
- Retail sector not ready for gains
- Many influencers say the market has peaked
- market short
- Overwhelmingly bearish position
- The end result is likely to be a sharp rise.
Bet $ETH
CG ( @pakpakchicken ) believes $ETH will stand out during the up cycle.
As Larry Fink points out, debt is unsustainable in the long run.
While the dollar has value, everything will transition and be tokenized.
Only one L1 has stood the test of time and has the highest adoption rate to date - ETH
respect probability
While CG ( @pakpakchicken ) is leaning towards the upside, further downside is not out of the question. Macro expert @fejau_inc sees slowing economic growth as fundamental and believes there is a risk of a major downside surprise not seen since 2019.
