As global central banks pull back liquidity at a record pace, Bitcoin seems to be emerging as a safer haven for investors. The renowned financial analyst, The Kobeissi Letter, recently highlighted the shrinking liquidity in the financial system, with central bank balance sheets dropping to levels not seen since 2020. In this environment of tightening money, cryptocurrency has thrived in the turmoil market, with Bitcoin’s rise standing out.
Global Liquidity at Historic Lows
In 2022, major central banks expanded their balance sheets to a record ~$25 trillion, or about 25% of global GDP—mainly in response to the pandemic. This injection of liquidity was meant to stabilize economies and financial markets. However, The Kobeissi Letter notes that these balance sheets have since shrunk by $5 trillion, bringing global liquidity down to approximately $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How Much Liquidity Has Been Withdrawn from the Global Financial System?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 trillion. As liquidity dries up, traditional financial markets are expected to face challenges. In fact, global central banks are estimated to cut another $1 trillion from their holdings over the next year, reducing liquidity even further.
Bitcoin’s Role as a Safe Haven
Bitcoin continues to show its strength as global central banks reduce liquidity. Since November 2023, Bitcoin has risen from $18,383 to a current value of $63,104, representing a massive 340% jump. This significant increase demonstrates that more people see Bitcoin as a safe investment during economic uncertainty.
Experts suggest that Bitcoin’s recent price surge indicates its growing popularity as a hedge against inflation. As global central banks plan to cut another $1 trillion from their balance sheets next year, financial author Robert Kiyosaki has made a bold prediction for Bitcoin’s future. Kiyosaki believes Bitcoin could soar to $500,000 by 2025, which would mean an incredible 820% increase from its current price. He even hints that by 2030, Bitcoin could reach a staggering $1 million.
Bitcoin Price Analysis
Bitcoin’s price has been making a comeback recently, bouncing back from the $52,500 support level earlier this month. Over the last few weeks, BTC has climbed back to the $57,000 and $60,000 marks. However, the key $64,000 level and the 200-day moving average still stand strong, as the market continues to test them.
If Bitcoin breaks through this level, it could set the stage for a new all-time high in the weeks ahead. Are we on the brink of a major price surge? Only time will tell, but the current trends and expert predictions paint an optimistic picture for Bitcoin’s future.
