Liquidity Waves (Impulses) v BTC

Its now widely known that Global Liquidity has a impact on Bitcoin from a price performance, i.e below we had the ‘Shadow-Monetary-Base impacted by Move Index volatility’ which in essence is Eurodollar hypothecation (haircuts) which feeds into BTC Price (directionally and price).

Additionally Total Global Liquidity (Global Liquidity & Shadow Monetary Base).

What i wanted to do was look at the Liquidity Impulse(s) and the ‘Wave’ impact those have on Bitcoin.

First i came up with the following (rudimentary) in hind-sight which covered Total Global Liquidity.

However what you can clearly see is the ‘wave’ impact on BTC (rising width = explosive growth/tightening etc), note BTC is shifted forward 5 months as this is the impact period, i.e Liquidity Leads.

But this would be a foolish to assume just Total Global Liquidity would be sufficient (wave wise) i.e at the moment BTC should be exploding but it isn’t so we need to factor in various other elements.

These include YCC-Not-YCC (Yield Curve Control) that the US Federal Reserve uses to sedate the Convexity of the 30Yr MBS as a 10Yr so as to control the MBS Bond market whilst not so concentrating on the 10 Yr → i.e people have been calling for a recession since 2022 whereas parts of the country has been in recessionary conditions others have not, this is all downstream of YCC-Not-YCC and QE-Not-QE.

The following chart(s) represent this (YCC) to sedate the “Synthetic 10” part of the Convexity of the 30Yr MBS, whereas the “10 Yr” rate itself inverted, thus various aspects had blow-outs but the MBS side didn’t thus the collateral base didn’t.

You’ll also note YCC downstream impact is on the Dollar (DXY) also which is why I have been dismissive of various “Macro heads” claiming the Dollar is going to explode to 120, because the Federal Reserve is actively pushing the Dollar down as shown here whilst Trump(s) Treasury/Rhetoric supports that.

Now coming back to the Wave side, this meant I should also factor in YCC - Not - YCC we call it this because the market doesn’t realize its YCC and keep claiming the US will need to do YCC in the future without realizing that YCC is always on-going, just behind the scenes and knowing where to look for it, as evidenced above.

So i come to the following Chart prior to that, BTC Driver(s) - Stacked Impact Share (Lag-Adjusted) — What you have is Total Global Liquidity, Stealth QE (QE-Not-QE/Treasury QE) and YCC Suppression (YCC-Not-YCC) where its a Rolling R2 Weighted Impact Accessor, i.e Whats driving Bitcoin(s) performance (Pearson R).

Ok, so Stealth QE-Not-QE is an area we need to concentrate on considering the US Economy (below) as represented by the Bitcoin Implied ISM — as Bitcoin benefits from Liquidity, but it also needs liquidity flow to outperform in it’s huge volatile upwards momentum periods, and this is driven by Main-Street and Wall-Street having additional risk tolerance, as well as additional funds, i.e for Main-Street when you are no longer worried about putting food on the table, you either spend into the economy (consumerism) or invest, when you invest as currency is debased assets optically rise, and when some assets rise more than others — allocations are made, i.e BTC with a fixed supply absorbs marginal flow of funds which supports the liquidity induced optical rise and thus you have explosive growth whilst liquidity momentum and economic momentum are in the Goldilocks zone, naturally liquidity/funds flow downstream into ETH, Solana and other less honorable shitcoins chasing returns and this give’s us our booms and busts within the Crypto Ecosystem.

The chart above shows that the US ISM Index (survey of the business cycle) has only gone above 50 (briefly) twice since 2022 which aligns with the K-Shaped economy (asset holders aloof, ‘wage cucks’ treading water) — which comes back to the Synthetic 10’s-2’s (YCC) enacted, i.e collateral base hasn’t collapsed but the economy is ‘sick’ or rather was ‘sick’ i.e the Biden-Harris Presidency was all about ‘hiring people into the federal government, using YCC-Not-YCC and QE-Not-QE to give the facade everything was ok, reality was ‘wage cucks’ were treading water, and the economy was just about to roll over as they drew down the 6T$ of Fuzzy-Wuzzy QE-Not-QE and YCC-Not-YCC just as Trump entered office (starting in September 2024) i.e they didn’t mind fucking the plebiscite as long as Harris got into office, and when Trump won they set it up for a huge fall… naturally Bessent actually knows how to trade the Fuzzy-Wuzzy and was at first against it (Emerging Market Economics / Failing State Economics) but was forced to re-activate whilst looking for a way to shift the risk of running it hot elsewhere…

Which brings me to the SLR Changes which i won’t go into detail about but are pretty much below…

US regulators are finalizing changes to the Supplementary Leverage Ratio (SLR) for large banks, proposing to tie it more closely to risk, especially for Global Systemically Important Banks (GSIBs), aiming to free up capital, improve Treasury market liquidity, and reduce disincentives for holding low-risk assets like government bonds, with final rules expected soon for adoption in 2026

Note : Considerable Short-Term Rollovers are being directed into Stablecoins (pulls in some of the Shadow Monetary Base hypothecation into a non-opaque system (Eurodollar is opaque) — its expected 1/2 T$ which will alleviate the need for changes as the US can use that process to “run-it-hot’ and inflate away its debt i.e the more stablecoin demand + lower rates (they control the short-end) enables them to push their debt debasement off to the masses opposed to ring-fenced overseas nations.

Note part of a thread/conversation I had with Raoul Pal last week reference Liquidity — and his view eSLR (SLR).

Me - FYI Dr Michael Howell says liquidity has peaked

RP - We just don't see that but time will tell
Me - I’m hopeful - Chinese / PBoC debasing debt is increasing 1-2t$ same source, US liquidity (yours, his says increasing also). Sometimes hard to derive meaning because statements counteract. Either way there’s not enough juice for rollover so they’ve got to do something or allow the system to blow. So following your hunch/theories.

Raoul believes SLR changes will inject liquidity (credit creation within the banking sector) into the economy (Business Cycle Running It Hot), whilst Fed QE (marginal) will support minor liquidity constraints, and Rates Decline will enable re-hypothecation / refinancing.

I agree with this, only issue I have (mentioned in 2022 — cycle has changed i.e 2yr liquidity impulses at the time i said followed by year decline then 2yr liquidity impulse, with the debt refinance cycle, liquidity cycle and business cycle all out of delayed-sync we have constraints popping up).

Thread/conversation with Dr Michael Howell.

Me - Is this factoring in the US Liquidity kickstarting again from Jan (SLR) and of-course long-roll-over to short (Treasury QE) increasing alongside Rate Declines (May and possible forced QE Increases). I.e will the US Liquidity Cycle peak or will momentum decline whilst a sideway liquidity push occurs.

Dr Michael Howell - I still think Fed policy is acting as a 'put' on the repo market. In other words it is consistent with a range bound market in risk assets

Me - 1) Next year they need 7T$ for debt refinancing this implies they need to generate that via Banking, or QE or some form which should imply that liquidity will flow next year - correct?

2) In respect of BTC (it lags) so that would imply (now - tomorrow onwards) the peak in the liquidity should start to be expressed in BTC - Correct?

3) Gold feedback loop into BTC would imply that BTC would benefit as the liquidity gushes out of Gold/Silver into other markets would provide additional run-way for BTC - Correct?

I.e the “Risk off” would likely be in Q1 2026 - likely mid Jan due to Gov shutdown, and dependent on how the US introduces enough liquidity (or doesn’t) determines re-entries, if they don’t then its like 08 etc and then they will be forced to re-start open QE at a larger scale, if they do that should in theory support (lift markets optically)?

Dr Michael Howell - The liquidity balance will be the interplay between the Fed/ treasury in US and PBoC in China. The PBoC and US Treasury 'QE' push liquidity more towards real economy. The Fed is the backstop for financial markets but it is likely to be reactive and only inject cash when repo tensions build. Q1 may be a time of tension. Overall, note pace of US NGDP. This high clip doesn't seem consistent with strong financial assets, but should favour commodities. Oil is out-of-favor, tech remain in favor. I'm suggesting the opposite switch. Timing BTC in this environment is tricky. I accept your points and note the paradox of strong gold/ weak BTC can easily reverse ST.

However as i’ve pointed out — the market already peaked — in late 2024 even though prices have optically risen driven by Stealth QE / QE-Not-QE since, hence, Bitcoin rising but Shitcoins being in a depression as the Economy didn’t rise just asset(s) did as there was more credit/hypothecation on-going domestically and within the shadow-monetary-base (Eurodollar Markets), whilst Risk (Move Index) has been sedated.

Conversation is to determine where the funds flow, i.e i need to derive/confirm as Raoul believes ~7T$ of liquidity will be generated out of the changes ahead, i need to know if a larger % of that is going into my back-pocket, or is a larger % of that going into the ‘wage cucks’ back-pocket, i.e am i betting on the correct horse, as these changes are different from the current prior structuring of liquidity flow.

So now we return to the eSLR (SLR) changes below.

The US Has a problem it’s rolling over long-term debt into short-term debt that needs to continuously be rolled over, this is as mentioned above EME/FSE — So the US is lowering the SLR (basically depositor backing) so the banks can hold more short-term debt (inflationary) as they need to then put the funds to work (depositors) to earn a higher yield and they are currently not keen to keep adding long-term debt onto their balance sheet due to hold-sell = loss, hold-maturity = profit (nominally), i.e below Unrealized Gains (losses) for US Banks currently (Silicon Valley i.e Bail Outs but at 400-600B$ if they are forced to liquidate).

So the banks can now scoop up the short-term debt as the long-term debt is rolled over, but now there is the issue where to put that capital to work, Trump is pushing for it to be invested in the US Economy (Infrastructure/Tech roll-out/Military etc) whereas the banks were looking to generate credit lines (think preemptive 08 style), however with this recent tweet…

https://www.theguardian.com/us-news/2026/jan/10/trump-credit-card-interest-rate-cap

This would in theory curtail that — by forcing banks to de-risk, i.e he’s demanding (socialism) lower rates for credit card interest for consumers — banks would instead reduce their riskier client base thus not entice credit-consumerism and redirect their hypothecation capabilities elsewhere into the economy (if credit isn’t one place it has to be in another), thus into the real economy, thus generate actual real-GDP growth, rather than optical credit GDP growth which seeps in-part into Real-GDP.

Which brings me back to the following, the second iteration of the Liquidity Wave Index, which has YCC-Not-YCC Wave, Total Global Liquidity Wave, QE-Not-QE (Stealth/Treasury QE) Wave and then finally a blend… it wasn’t perfect but it provided an insight into the lag/lead times such had.

This provided the insight into one that was dynamically adjusting/calculating and a blended version (4th chart) above that factored in the dynamic over-time lag/lead impacts of the various waves.

Providing a roadmap all the way to June 2028 for the Bitcoin 12m Change Logarithmic wise.

I.e see the following you have Bitcoin 12m Change Log % within the Dynamically Blended Wave (QE-Not-QE/YCC-Not-YCC/TGL) which self determines the impact these forms of liquidity have over-time and with what lags/leads, then constructs a “Blended Wave” - BTC has to be shifted back to 0 from a 5 Week Lead, the Blended Wave shifted back 31 Weeks and you have your roadmap ahead — if there was more SMB data we could do this back to 2010.

Which more importantly provides the band points that the market provides for Bitcoin (solely on forms of liquidity not including Business Cycle — however respects the -4 to +4 band radius generally over time) provides a insight where its at the base of it(s) run and has a potential -12% to 60/80% lee way ahead (upside) through June / Sep, with liquidity (blended) declining Oct 2026 through to May 2027… note momentum is something you also need to consider.

There is something else to consider, highlighted below — the Blended Waves are declining however it is expected two things to occur.

• Trump Tariffs considered unlawful - supreme court allows him to keep the loot but force him to follow the law (good for liquidity and business investment/cycle).

  • Trump introduces tariffs via other means (impactful but less volatile)

• Trump uses Tariffs to provide direct stimulus to the plebes (good for liquidity/consumerism / business cycle)