Bitcoin has shown a strong correlation with global liquidity, with the cryptocurrency generally rising when liquidity expands and correcting when liquidity shrinks, according to a report by venture capitalist Lyn Alden. The report finds that Bitcoin's price has a very strong positive relationship with global liquidity, with a correlation of 0.94 between May 2013 and July 2024. However, the correlation weakens over shorter timeframes. Bitcoin has the highest average correlation with global liquidity over a rolling 12-month period compared to other assets, followed closely by gold. The research suggests that global liquidity is a key driver of Bitcoin's long-term price performance, but the correlation can break down during significant industry events or extreme market conditions. The study concludes that combining the analysis of global liquidity with on-chain metrics can provide a more comprehensive understanding of Bitcoin's price cycles.



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