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Independent bitcoin rally or high beta move? Either way, bitcoin owners celebrate the latest action to start 2023. Bitcoin has shown some significant momentum and has dominated every major short-term price level in the daily moving average and the price realized on the chain. In fact, every high-beta play in the market shows the same strength that gives us more caution than belief in the latest short squeeze highlighted last week in “Bitcoin Rips To $21,000, Shorts Removed In Biggest Squeeze Since 2021.”
As much as we would like to see independent bitcoin go higher, there are many signs in the market that point to the opposite. We have seen a fairly significant bounce in the most oversold names in 2022, with a short remote and a subsequent round of FOMO from the 2022 bottom.
Bitcoin versus high beta returns.
This recent risk rally has seen equity market volatility plunge to record lows as the US dollar continues to weaken in the short term, the National Financial Conditions Index (NFCI) is loose and the global M2 money supply contracts more slowly than last time. a few months.
Global M2 is mapped against bitcoin’s year-over-year growth.
Source: Bloomberg
Net liquidity, the model highlighted in the previous piece, shows a contraction compared to last year but has not changed much over the past few months. If we see the sustained rally continue, we would like to see net liquidity growth over the next few months to be the main driver accompanying this move.
In the minutes of a recent meeting, members of the Federal Reserve expressed concern about “unwarranted easing in financial conditions” caused by risky assets and then hindering efforts to reduce inflation.
With the Bank of Japan deciding whether to loosen monetary policy, this could lead to carry trades easing. We see this as one of several ways that the two dollars could fall together with global equity markets, with equity repricing due to rising US capital costs.
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