The cryptocurrency and global stock markets may face significant challenges after recording a decline in investment flows. The latest data from central banks indicates that total assets on balance sheets have decreased sharply over the past 30 days, which is seen as an indicator of global liquidity.
Although it does not fully reflect the liquidity currently available in the market, this index provides insights into the macroeconomic environment, which can both support and limit capital flows into risk assets like Bitcoin (BTC).
The implications of negative global liquidity for risk assets
In the past, Bitcoin has recorded strong growth when global liquidity increased, particularly during the bull run from 2020 to 2021. However, when this index turned negative in late 2021 and throughout 2022, Bitcoin struggled to maintain its growth momentum on the charts.
A prolonged decline, with the index once again dropping below 0, could be a sign that risk appetite is weakening. This condition often reflects tighter monetary policies or cuts in financial support.
This may also lead to a decrease in demand for Bitcoin and other risk assets like the S&P 500.
Source: Alphractal
The recent decline is similar to previous instances when risk assets slowed down or faced difficulties. In fact, the drop in liquidity suggests that investor sentiment is becoming more cautious. Many investors often reduce their investments in cryptocurrency assets in volatile market conditions. If the liquidity situation continues, upward price pressure may weaken.
Can Bitcoin regain its correlation with the S&P 500?
In this context, the past two weeks have shown that Bitcoin has recorded lower gains compared to stocks, which is different from its usual trend in the market. The gap over the past two weeks indicates that BTC has stopped growing while stocks remain near their highs.
Bitcoin experienced high demand during the chaotic period due to tariffs — 'Tax Day/Tax Liberation' — and has achieved significant gains afterward. However, it still fell below the 18 ratio.
Unless Bitcoin can reclaim this important threshold, the current weakness may only be temporary.
Can Bitcoin regain its dominance in the macroeconomic context?
Investors seem to be feeling hesitant. The weak correlation between BTC and stocks indicates reluctance in investment decisions. Risk appetite has shifted — at least temporarily — towards traditional markets.
If current macro tensions ease again, Bitcoin could recover and begin to lead the market as it did after previous shocks. If risk appetite continues to tilt towards stocks, BTC may drop further and fall below the 17:1 ratio compared to the S&P 500, especially if its momentum weakens.
The 18 level continues to play an important role as a resistance level, while 16 is the main support level. Sudden changes in macroeconomic conditions or significant fluctuations in the stock market could be the triggering factors for BTC's next move.
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