Bitcoin's correlation with global liquidity is stronger than that of gold and stocks

According to a report by venture capitalist Lyn Alden, Bitcoin (BTC) has an 83% correlation with global liquidity, surpassing all major asset classes. The report points out that Bitcoin typically rises during periods of liquidity expansion and adjusts when liquidity contracts, making it the "purest indicator of liquidity". From May 2013 to July 2024, the correlation between Bitcoin and global liquidity reached 0.94 but weakened in the short term, with rolling averages over 12 months and six months at 0.51 and 0.36 respectively. Liquidity is measured by M2 supply which includes cash and bank account funds etc. The report believes that global liquidity is a key driver of long-term price performance for Bitcoin; investors can use this information to analyze market cycles for Bitcoin. However, this correlation may weaken under significant industry events or extreme market conditions.