Bitcoin (BTC) price discovery is a given now that global liquidity is breaking into undiscovered territory, as highlighted in Bitcoin analysis.
On that note, Bitcoin stands to enhance its current bull run due to record-high global liquidity. A new analysis published on June 5 by Philip Swift, the developer of the on-chain data platform LookIntoBitcoin, shows that liquidity globally is nearing $100 trillion.
Global Liquidity Record Suggests BTC Price Copycat Movement
Bitcoin and the crypto markets are majorly sensitive to global liquidity trends, and in 2024, the condition might not be highly conducive to BTC price upside. That was the conclusion from Swift, whose platform tracks the world’s M2 money supply and compares it to Bitcoin price behavior.
In United States dollar terms, M2 is now at $94 trillion which is more than ever before and $3 trillion higher than when Bitcoin reached its old $69,000 all-time high in late 2021. Since reaching local lows of $85 trillion in late 2022, coinciding with the pit of the crypto bear market, M2 has rebounded a significant 10%.
Swift wrote in part of the accompanying commentary on X:
“The most important chart for this bull run has just made a new all-time high. Are you ready?”
This data chimes with other recent liquidity-base findings, which have also attracted bullish conclusions about where Bitcoin is headed.
Bitcoin versus the US M1 money supply is now in the process of breaking out from a 7-year consolidation period, the longest in BTC’s history, with serious upside implications as a result.
Bitcoin Investor Trend Copies 2020
As financial conditions ease, more analysis indicates a growing appetite among institutional investors for crypto and risk assets.
In its most recent “Weekly Report” sent to publications, the on-chain analytics platform CryptoQuant drew comparisons with investor behavior in 2020. It revealed:
“Indeed, large investors are adding about $1B into Bitcoin, paralleling 2020 before the rally from $10K to $70K. Back in 2020, Bitcoin hovered around $10k for 6 months with high on-chain activity, later revealed as OTC deals.”
“Now, despite low price volatility, on-chain activity remains high, with $1B added daily by new whale wallets, likely in the form of Bitcoin purchases from institutional investors entering into custody wallets.”
An accompanying chart compares the aggregate cost basis, also referred to as the realized price, of new whales from 2020 to 2024. CryptoQuant also highlighted growing inflows to the US spot Bitcoin exchange-traded funds, or EFTs, which saw their second-highest net inflows on June 4.
Bitcoin Open Interest Explodes, But Traders Warn Of A ‘Whipsaw’
Bitcoin’s open interest (OI) spiked $2.02 billion in three days, sparking concerns among traders about a possible ‘whipsaw’ event.
Pseudonymous crypto trader Daan Crypto Trades commented in a June 5 X post:
“Bitcoin’s [had] quite the run-up in Open Interest over the past 3 days.”
Open Interest is the total number of derivatives contracts, such as futures or options that have not yet been settled, a surge could suggest more traders are speculating on the asset.
Kelly Kellam, BitLab Academy director, explained that the abrupt surge in Bitcoin’s OI and the continuation of positive funding rates indicate the potential of a whipsaw action on the price of Bitcoin, which is when there is an abrupt price move in the opposite direction of the current trend. He added:
“The open interest ticking up as the positive premium persists (everyone going Leveraged Long) is a recipe for a small correction BTC health check.”
Bitcoin’s OI spiked $2.02 billion over three days, hitting $36.92 billion on June 6, according to CoinGlass data.
Open interest is the total number of derivative contracts that have already been settled, such as futures or options. A huge amount of open interest can increase price swings, specifically when traders hold multiple positions and decide to abruptly adjust their strategy. In that context, it can also influence the general sentiment of traders who utilize OI as a signal to decide whether to hold or sell their crypto assets.
Bitcoin’s price trades at $70,890 at the time of publication, up 4.23% in the past seven days, according to CoinMarketCap data.
If Bitcoin’s price retreats steeply by around 4% to $68,000, nearly $1.96 billion in long positions might be wiped out, a possibility that should not be overlooked, despite the general sentiment in the market, based on pseudonymous crypto trader Jelle. They added:
“While I’m confident Bitcoin enters price discovery soon, I’m pretty sure it won’t happen without some major volatility.”
