With global central banks pulling back liquidity faster than ever, Bitcoin is becoming a safe haven for many investors. Financial analyst The Kobeissi Letter recently highlighted how liquidity is shrinking in the financial system, as central bank balance sheets drop to levels not seen since 2020. In this environment of tightening money supply, Bitcoin’s rise stands out.
Global Liquidity at Historic Lows
In 2022, central banks expanded their balance sheets to an all-time high of $25 trillion, about 25% of global GDP, to stabilize economies during the pandemic. This massive liquidity helped support financial markets.
However, The Kobeissi Letter notes that these balance sheets have since shrunk by $5 trillion, bringing global liquidity down to $20 trillion—the lowest since 2020.
How much liquidity has been withdrawn from the global financial system?
In 2022, the major central banks’ balance sheets hit a record of ~$25 trillion, or ~25% of global GDP, in response to the pandemic.
Since then, the aggregate central bank balance sheet has shrunk to ~$20… pic.twitter.com/rnKyZE8uTl
— The Kobeissi Letter (@KobeissiLetter) September 23, 2024
As liquidity dries up, traditional financial markets are expected to face challenges. Central banks are likely to cut another $1 trillion from their holdings in the next year, reducing liquidity even further.
Bitcoin’s 340% Surge Amid Liquidity Cuts
As central banks pull back, Bitcoin has shown remarkable strength. Since November 2023, Bitcoin has jumped from $18,383 to its current price of $63,104—a huge 340% rise. This shows that more people are seeing Bitcoin as a safe investment during uncertain economic times.
Experts believe this surge indicates that Bitcoin is gaining popularity as a hedge against inflation. With central banks planning to cut another $1 trillion next year, financial author Robert Kiyosaki has predicted Bitcoin could soar to $500,000 by 2025, an incredible 820% increase from its current price. He even suggests Bitcoin could reach $1 million by 2030.
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Is a New All-Time High for Bitcoin Coming?
Recently, Bitcoin bounced back from the $52,500 support level and climbed to $57,000 and $60,000. However, the key $64,000 level and the 200-day moving average remain strong barriers.
If Bitcoin can break through this level, it might set the stage for a new all-time high in the weeks ahead. Are we about to see another major price surge?
