All credits to Ostium insights which can be found here
Intuition behind different indicators.
DXY and USDCNH
NOTE: The DXY and USDCNH are on an inverted scale
They are a proxy for the US dollar strength.
BTC suffers as dollar strengthens and vice versa.
Global Liquidity Index
Rising global liquidity and strength in bitcoin are highly correlated.
If we expect global balance sheet expansion, we should anticipate outperformance in BTC.
GLOBAL M2 / GLOBAL GDP
It is the rate of growth of global money supply outpacing the rate of growth in goods and services produced globally, where periods of of growth in this ratio correlate highly with outperformance in Bitcoin and periods of decline in this ratio are generally unsupportive of Bitcoin.
M2SL/DXY
At its core, this is a measure of the growth rate of domestic Dollars vs. the strength of the Dollar internationally.
As M2SL/DXY rises (US M2 is growing faster than the Dollar is strengthening vs. other currencies), this is a proxy for growing liquidity in the financial system - in effect, a good barometer for the relative easiness or tightness of financial conditions. This is also indicative of weakening purchasing power of the Dollar itself via currency debasement. Lastly, a rising M2SL/DXY can indicate that international borrowers can access dollar liquidity more favourably. This all, in turn, leads to a growing risk appetite and capital flow into financial assets, as we can see from the ratio mapped vs BTC/USD.
As the ratio declines, the inverse is true - liquidity is tighter and financial conditions are less easy, often leading to a flight away from riskier assets.
Intuition behind different indicators.
DXY and USDCNH
NOTE: The DXY and USDCNH are on an inverted scale
They are a proxy for the US dollar strength.
BTC suffers as dollar strengthens and vice versa.
Global Liquidity Index
Rising global liquidity and strength in bitcoin are highly correlated.
If we expect global balance sheet expansion, we should anticipate outperformance in BTC.
GLOBAL M2 / GLOBAL GDP
It is the rate of growth of global money supply outpacing the rate of growth in goods and services produced globally, where periods of of growth in this ratio correlate highly with outperformance in Bitcoin and periods of decline in this ratio are generally unsupportive of Bitcoin.
M2SL/DXY
At its core, this is a measure of the growth rate of domestic Dollars vs. the strength of the Dollar internationally.
As M2SL/DXY rises (US M2 is growing faster than the Dollar is strengthening vs. other currencies), this is a proxy for growing liquidity in the financial system - in effect, a good barometer for the relative easiness or tightness of financial conditions. This is also indicative of weakening purchasing power of the Dollar itself via currency debasement. Lastly, a rising M2SL/DXY can indicate that international borrowers can access dollar liquidity more favourably. This all, in turn, leads to a growing risk appetite and capital flow into financial assets, as we can see from the ratio mapped vs BTC/USD.
As the ratio declines, the inverse is true - liquidity is tighter and financial conditions are less easy, often leading to a flight away from riskier assets.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.