Today, let's take a further look at how the current global liquidity affects the upcoming trends in the crypto space, is it optimistic or pessimistic?
According to the latest public data on the U.S. money supply M2, as of February 2025, the market liquidity is $21.6 trillion, which has reached the peak in March 2022.
Currently, the Federal Reserve is in a rate-cutting cycle. Although there was no rate cut in the March meeting and it remained unchanged, in the Q&A session after the meeting, Fed Chair Powell stated: The Federal Reserve made a technical decision to slow down the balance sheet reduction (effectively providing liquidity to the market).
Meanwhile, under Musk's efficiency department, the U.S. government has reduced a large amount of expenditure, politically leaning towards shedding the burden of Europe, which is also part of the cost-cutting.
During Trump's administration, at least we had a very clear financial direction, which was in consensus with Wall Street, all pointing towards: the crypto market.
So in 2025, from the perspective of liquidity, the situation for the crypto market is objective. How can we foresee and capture the trends of global economic liquidity in advance?
Financial liquidity and industry cycles are mutually complementary, the overall financial cycle will be larger and slower, similar to a large ship turning around, needing a gentler brake.
However, the crypto market is currently not that large, and it has always been highly volatile, reacting quickly because capital grasps the cycles, and resource information is faster than retail investors. Once capital understands the policy direction, it will position itself in advance, reflected in the K-lines and trading volume.
For instance, in this bull market's onset, why could San Cai determine in November 2022 that Bitcoin at 15487 signaled the bottom of the bear market, gradually turning into a bull market when the market believed interest rates would continue to rise and Bitcoin would drop below 10,000? The entire market in 2023 also believed it was in a bear market until the halving of Bitcoin in 2024, when the U.S. maintained the interest rate unchanged and Bitcoin's price had already reached 60-70,000. At that time, retail investors would again worry that the price was too high and fear a significant drop. Conversely, capital's withdrawal also reacts in advance in the market, rather than waiting for interest rate hikes or cuts when liquidity is already apparent.
Looking back, we can see that the circle in 2022 was the peak of M2, but how could we judge it at that time? Couldn't it be lower in advance?
The long cycle can provide us with a long-term direction, but how to navigate the medium-term direction, when to stop falling, and when to reach the peak requires cooperation with the market, understanding the market trends.
So, we can observe the economic policy of the long cycle, but we cannot lack technology, continuously tracking the market, to know when changes will occur.
