Bitcoin is acting as a liquidity indicator for central bank balance sheets

quick take

• With the world facing extreme inflation, central banks are trying to keep inflation in check by shrinking balance sheets (quantitative tightening) and raising interest rates.
• The blue line takes into account the balance sheets of the US, Japan, UK, China, and European central banks, reaching $760 trillion. Down from $800 trillion in May 2022.
• The red line represents net liquidity, which is equal to the Fed’s total assets (treasury + reserves).
• The orange line is the Bitcoin price.
• There have been many stories unfolded about Bitcoin over the years. One is an inflation hedge and the other is a liquidity hedge.
• As central banks need to expand their balance sheets for their credit-based systems, i.e. their need for perpetual growth, BTC is moving towards credit expansion on its balance sheet, which has been seen in the recent price rally. can be These movements are important to witnesses.

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