Raoul Pal's Global Liquidity Cipher: Why BTC Holds Turning Points in Extreme Selloffs

Renowned macro analyst Raoul Pal recently shared his in-depth analysis of global liquidity and Bitcoin trends on social media. Amid many investors feeling frustrated and some technical analysts claiming the market has peaked, Pal sees an undervalued opportunity—strong upward signals from global liquidity that will directly drive a rebound in risk assets like BTC.

The 90% Correlation: How Global Liquidity Drives BTC Trends

Global liquidity is arguably the most important macro factor influencing the cryptocurrency market. According to Pal’s analysis, since 2012, global liquidity has had a remarkable 90% correlation with BTC, and an even higher 97% correlation with Nasdaq 100 futures (NDX). This means that when global funds are abundant, BTC tends to rise; and vice versa.

Currently, global liquidity is growing at about 10% annually, with no signs of slowing down. This alone is enough to dispel the “cryptocurrency is dead” narrative. The Global Market Indicator (GMI), a leading indicator of global liquidity, leads the crypto market by about six months. The GMI remains in an easy monetary environment, indicating that the crypto market will continue to receive steady liquidity support over the next six months.

Macro Environment Improving: Three Major Drivers Accelerating

U.S. overall liquidity was significantly suppressed during the economic standstill, creating a clear bearish zone. But from three months ago’s lows, this indicator has started to accelerate upward, leading the crypto market by about three months. This suggests an imminent recovery signal for the crypto space.

The business cycle is a key driver of returns and risks, and it is currently accelerating upward. The excess reserve ratio (eSLR), a crucial mechanism for banks to expand credit and absorb government bond issuance to boost liquidity, continues to rise and is expected to accelerate further. The influx of tax refunds has injected new vitality into bank balance sheets, increasing the propensity for credit creation and raising overall liquidity levels.

Policy Gains Unleashed: Opportunities with Stablecoins and the CLARITY Act

The start of the U.S. rate-cut cycle is expected to increase disposable income and investor risk appetite. The highly anticipated CLARITY Act is likely to pass soon, which will address long-standing issues in the crypto industry—many banks and asset managers want to use this technology but are constrained by legal uncertainties. Its passage will open the floodgates for capital inflows.

Stablecoins are entering a breakout phase. Data shows that stablecoin issuance grew by 50% over the past year, and this growth is accelerating. Trading volumes have reached billions of dollars and continue to expand. All signs point to the same conclusion: the U.S. government’s attitude toward cryptocurrencies has reached a historic high, shifting from regulatory opposition to support and embrace. As institutions gradually build and participate, market development will accelerate significantly, ultimately creating a large, serviceable new market.

Technical Rebound Signals: DeMark Indicators Show Extreme Oversold Conditions

From a technical perspective, the crypto market remains in panic mode, but this is precisely the most meaningful signal. According to most technical indicators, the market is at one of the most extreme oversold levels in history. The DeMark weekly indicator will provide strong support signals in two weeks (currently available on TradingView’s official platform), and the daily DeMark indicator has also converged at a critical level.

Once any faint rebound signals appear, both the daily and weekly DeMark indicators will fully confirm a trend reversal. Currently, BTC is priced at $70,870, up 2.92% in 24 hours, and these small changes may be precursors to a major rebound.

Clarity in Two Weeks: Crude Oil Prices as a Key Variable

Among current risk factors, the sustained high levels of crude oil prices are noteworthy. The next two weeks will be a crucial observation period. Pal believes that all the macro factors, liquidity drivers, policy support, and technical signals will point in one direction—the market is poised for a significant upward breakout. Stronger upward momentum is on the horizon.