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Bitcoin Analysis: Beyond the Block – August 2024
Today the Ainslie Research team brings you the latest monthly update on #Bitcoin – including the #Macro fundamentals, #market and on-chain technical metrics and all the other factors currently driving its adoption and price. This summary highlights some of the key charts that were discussed and analysed by our expert panel. We encourage you to watch the video of the presentation in full for the detailed explanations.
Bitcoin and Global Liquidity
Bitcoin is the most directly correlated asset to Global #Liquidity. Trading Bitcoin can be thought of as trading the Global Liquidity Cycle, but with an adoption curve that leads to significantly higher highs and lows each cycle. As such we look to buy Bitcoin during the ‘Bust’ phase or liquidity low, then rotate out of it during the ‘Late Cycle’ where liquidity is over-extended and downside protection is required (our preference is to rotate into #Gold). When correctly timing and structuring the rotation, it is possible to significantly outperform ongoing monetary debasement. The Bitcoin cycle low was in November 2022, and since then the returns have been unmatched by any other major #asset.
Where are we currently in the Global Macro Cycle?
After many months of tracking sideways in the ‘Mid-cycle’, our Macro Cycle Indicator has started to tick up towards the neutral line. Contrary to popular belief, the global #economic outlook is still looking robust which is translating into strong asset prices even after the global market sell-off at the start of the month. Many pundits are still calling the beginning of a #bear market, but we can’t see it based on our macro and liquidity framework. Let’s dive in and take a closer look at the reasons why.
U.S. economic growth, as measured by the ISM data, is a useful tool to forecast the trajectory of the economy moving forward. Manufacturing has declined further into contraction while services have picked up. Overall, the leading indicator is still hovering around neutral with the expectation of picking up later in the year.
The 3-month indicator, which incorporates new orders less inventories, continues to show a mild bounce into the back end of the year. #Investors need to remember this data is a slow-moving beast and can take some time to show a noticeable pick up into expansion.
We continue to be ahead of the curve with regard to official inflation data. This month inflation in the U.S. by our estimates has made another low of 1.4%. Official data from the Federal Reserve also came in softer than expected paving the way for a 68% chance of a 25bps cut, and a 32% chance of a 50bps cut. While the Federal Reserve dictates monetary policy for the U.S., other central banks will follow suit allowing their respective governments to borrow more and fiscally stimulate their economies.
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