Bitcoin is on “borrowed time” as global liquidity conditions turn against crypto and risk assets, new analysis warned.
In a thread on X on Dec. 6, Jamie Coutts, chief crypto analyst at investment firm Real Vision, delivered unwelcome news for Bitcoin (BTC) bulls.
Lagging BTC price faces new liquidity showdown
Bitcoin could well make further gains in this bull market, but the next three months may mark a pause for the party. Coutts said liquidity conditions, as expressed by his Bitcoin MSI macro model, suggest pain may come next.
“Bitcoin has hit new ATHs in the face of a deteriorating liquidity backdrop,” he said.
“1. If conditions worsen, the rally, while euphoric, can only last for a limited time. 2. If conditions ease from here, then a pullback is warranted, but then off we go again.”
Bitcoin vs. macro liquidity data. Source: Jamie Coutts/X
His findings came amid flash intraday volatility for BTC/USD, which printed a “Darth Maul” candle and wiped out hundreds of millions of dollars of both long and short positions in a snap $10,000 correction.
Source: Tony “The Bull” Severino
Coutts said that the model helped him call both the start and end of the last Bitcoin bear market in 2022.
“The macro and liquidity dashboard shows unequivocally sustained bearish momentum for most metrics,” he said, alongside liquidity data.
“This is not a panic moment; it's a warning. In these environments, $BTC posts its poorest returns.”
The next two to three months may see a troublesome trading environment return, Coutts said, adding that Bitcoin lags liquidity changes by around two months.
“This MSI indicator turned bearish in mid-October, but the Trump election win has (rightly) spurred a strong rally,” he said.
“Similarly, the model last went bearish in Feb but the ETF launch and flows kept BTC buoyant for another month. However, a persistent bearish liquidity backdrop eventually caught up (it was also a highly leveraged rally that needed time to clear).”
BTC price performance vs. global liquidity. Source: Jamie Coutts/X
Bitcoin bulls need weaker dollar
An additional consideration comes in the form of US dollar strength.
Related: 4 new BTC price targets see Bitcoin over $124K by New Year
The US Dollar Index (DXY) hit its highest levels since November 2022 last month — something Coutts hopes will remain a “fake breakout.”
US Dollar Index (DXY) 1-week chart. Source: Cointelegraph/TradingView
“This is constructive for my base case that conditions should ease going into Q1 2025,” he said.
“However, if it retakes that pivot high then we would likely see a very sharp pullback across all assets. It is not my base case, but it is something to be hyper-aware of.”
BTC/USD 1-hour chart. Source: Cointelegraph/TradingView
BTC/USD traded near $98,000 at the time of writing on Dec. 6, per data from Cointelegraph Markets Pro and TradingView.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.