🌹The future market of BTC not only depends on The Federal Reserve (FED), but also another important data👇

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After experiencing a week of fluctuating tariff frictions, the market finally had some breathing room over the weekend. However, how long this respite can last remains uncertain, as tariff issues are event-driven sudden occurrences that lead to safe-haven capital flows and a temporary collapse of sentiment, resulting in significant volatility. Nevertheless, once the market confirms the fundamental changes brought about by tariffs and the release of safe-haven sentiment, the entire financial market can find a new balance. This is also why global stock markets, especially U.S. stocks, ended last week with gains on Friday, which we can see reflected in the changes of the S&P 500 volatility index.
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🌹 It can be seen that the VIX index hit a new recent high last week, and in the past few years, it has been "comparable" to the extreme event of the Bank of Japan's interest rate hike last year, and then the financial turmoil caused by the epidemic in 2020, which is why the market has had such a big swing in the past week, after all, it is rare in history. Then, when this huge fluctuation comes to an end for the time being, what will affect the trend of the Crypto market will return to the cliché of "inflation" and "interest rate cuts", because only interest rate cuts can usher in a "flood of gold" and bring hope for the growth of risk assets led by BTC. We can analyze this correlation by comparing the trend of the global broad money supply (M2) and BTC over the past 10 years, and the chart below shows that BTC's huge increase in the past 10 years is based on the global M2 surge, and this correlation trend far exceeds other financial data.
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🌹This is also why every time the Americans announce data related to inflation or interest rate cuts, BTC always experiences fluctuations, as it ultimately affects whether new funds can enter the Crypto space. However, currently, it seems that most people in the Crypto market are focusing solely on the Federal Reserve's interest rate cut path, while ignoring another noteworthy data point—the PBOC's asset scale, which reflects the current liquidity situation of our country's currency. While everyone is paying attention to the financial markets on the West Coast, they are precisely neglecting our own financial liquidity, which is actually closely related to the fluctuations of BTC. After all, we are a major power, one of the largest. The chart below shows the changes in the growth of BTC over the past 3 cycles compared to the growth of the PBOC's asset scale, and it can be seen that this correlation almost spans every major BTC surge, coinciding with the four-year cycle.
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🌹PBOC's liquidity played a role in the Crypto bull market of 2020-2021, the bear market of 2022, the recovery from cycle lows in 2022-early 2023, the surge in Q4 2023 (before the approval of BTC ETFs), and the pullback in Q2-Q3 2024. Also a few months before the 2024 U.S. election, PBOC liquidity turned positive again, just bringing a wave of "election bulls". However, in the chart below, we can see that the size of POBC began to decline after September 2024, bottomed out at the end of 2024, and has now risen to the high point of the past year. In terms of data correlation, changes in PBOC liquidity usually precede large fluctuations in the BTC and Crypto markets.
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🌹Interestingly, during the BTC bull market in 2017, the Federal Reserve (FED) was not the one "injecting liquidity"; instead, it raised interest rates 3 times throughout the year and there was quantitative tightening. However, risk assets led by BTC still performed very optimistically in 2017, as the PBOC's scale reached a new high that year.
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🌹 In terms of the S&P 500's gains, there is also a correlation with PBOC liquidity. Historically, the annual correlation coefficient between total PBOC assets and the S&P 500 is approximately 0.32 (based on 2015-2024 data). Of course, in a sense, it is also because the PBOC quarterly monetary policy report overlaps with the time window of the Fed's interest rate meeting, so the correlation will be magnified in the short term. To sum up, we can find that in addition to paying close attention to the release of water from Laomei, we also need to pay attention to changes in domestic financial data. A week ago, the news was released: "Monetary policy tools such as RRR cuts and interest rate cuts have left sufficient room for adjustment and can be introduced at any time", what we have to do is to track this change. It is worth noting that in terms of asset size, as of January 2025, China's total deposits are $42.3 trillion, while the total deposits in the United States are about $17.93 trillion. Of course, another point that needs to be explored is whether the liquidity of funds can flow into the crypto market if there is, after all, there are still some restrictions, but Hong Kong has given the answer, and it is different from a few years ago in terms of policy tightening and convenience. Finally, to borrow a sentence from Rebus to end this week's commentary, "When the wind comes, pigs will fly", it is better to ride the momentum than to sail against the current, what we have to do is to dare to climb the stairs and fly against the wind when the wind rises.

#om #sol #pi #eth #btc