Recent studies indicate that price changes in Bitcoin are largely dependent on global liquidity. Economist Raoul Pal claims that 89% of Bitcoin's performance can be explained by changes in the money supply.
Impact of Global Liquidity on Bitcoin
According to Raoul Pal's research, 89% of Bitcoin's movements can be explained by global liquidity, suggesting a 12-week lag. Bitcoin, represented on a chart, follows the trajectory of global liquidity, highlighting how shifts in the money supply affect its price.
Monetary Factors and Their Significance
"If 89% of all BTC price movements are explained by global liquidity," Pal writes, "then by definition almost all 'news' and 'narratives' are noise." This statement emphasizes that monetary changes, rather than short-term factors, primarily influence the market.
Bitcoin's Prospects in 2025
Considering the ongoing increase in global liquidity in 2025, Pal's model suggests that Bitcoin may still hold significant upside potential. This supports the theory that Bitcoin operates as a macro asset, responding to liquidity and debasement cycles.
Thus, Raoul Pal's research highlights the importance of global liquidity for understanding Bitcoin price dynamics, indicating that long-term market trends are determined by economic factors.
