Key Points
- Bitcoin could surpass its previous all-time high due to a global liquidity surge.
- Major economies like the U.S. and China are injecting liquidity into the system, potentially boosting Bitcoin’s value.
Global liquidity surge is predicted to propel Bitcoin past its previous all-time high, according to several macroeconomic analysts.
Global Macroeconomic Shifts and Bitcoin
The global macro financial outlook has recently indicated a shift. Goldman Sachs economists over the weekend revealed a decrease in their estimations of a U.S. recession in 2025 from 25% to 20%, following the release of the latest U.S. retail sales and jobless claims data.
The economists further noted that if the forthcoming August jobs report continues this trend, the recession probability could decrease to their previously held marker of 15%. This has led to speculation that the U.S. Federal Reserve might soon cut interest rates in September, possibly by 25 basis points.
The potential rate cuts have already begun to impact the markets, with U.S. stock indices, including the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average, recording their largest weekly percentage gains of the year for the week ending on Aug. 16.
Furthermore, global liquidity has started to increase. Historically, increasing liquidity and easing recession fears have often been catalysts for bullish trends in the crypto space.
Liquidity Surge and Its Impact on Markets
To comprehend where Bitcoin might be headed, it’s crucial to understand the mechanisms behind the current liquidity surge and how it could affect the broader markets.
In the U.S., the Treasury seems ready to inject a massive amount of liquidity into the financial system. BitMEX cofounder and well-known crypto industry figure Arthur Hayes stated in a recent Medium post that this liquidity boost could push Bitcoin past its previous all-time high of $73,700.
One possible explanation is the upcoming presidential elections. Maintaining a strong economy is crucial, and this liquidity injection could be a way to ensure favorable conditions as the election approaches.
This liquidity is expected to be injected through the U.S. Treasury and the Fed’s several powerful tools, as Hayes explains in his analysis.
First, there’s the overnight reverse repurchase agreement mechanism, or RRP, the balance of which currently stands at $333 billion as of Aug. 19, down significantly from a peak of over $2.5 trillion in December 2022.
Hayes explains that the RRP should be looked at as a major pool of “sterilized money” on the Fed’s balance sheet that the Treasury is evidently looking to get “into the real economy” — aka add liquidity.
The Treasury also recently announced plans to issue another $271 billion worth of T-bills before the end of December, Hayes noted.
Moreover, the Treasury could also tap into its general account, the TGA, which holds a staggering $750 billion, which could be unleashed into the market under the guise of avoiding a government shutdown or other fiscal needs.
If both of these strategies are employed, we could see anywhere between $301 billion (the RRP funds) to $1 trillion pumped into the financial system before the end of the year.
Historically, Bitcoin has shown a strong correlation with periods of increasing liquidity. When more money is sloshing around in the economy, investors tend to take on more risk.
Given Bitcoin’s status as a risk asset — as well as its finite supply — Hayes argues that the increased liquidity means a bull market could be expected by the end of the year.
If the U.S. follows through with these liquidity injections, we could see a strong uptick in Bitcoin’s price as investors flock to the crypto market in search of higher returns.
Meanwhile, China is also making moves in its liquidity efforts, though for different reasons. The Chinese economy has been showing signs of strain, with recent data reportedly revealing the first contraction in bank loans in 19 years.
To counteract this pressure, the People’s Bank of China has been quietly increasing its liquidity injections. Over the past month alone, the PBoC has injected $97 billion into the economy, primarily through the very same reverse repo operations.
These measures could include more aggressive liquidity injections, which would further boost the money supply and potentially stabilize the Chinese economy.
Over the past few weeks, the yuan has strengthened against the U.S. dollar, which could provide the PBoC with more space to maneuver and implement additional stimulus without triggering inflationary pressures.
Jamie Coutts, chief crypto analyst at Real Vision, noted that in the past month, central banks, including the Bank of Japan, have injected substantial amounts into the global money base, with the BoJ alone adding $400 billion.
When combined with the $97 billion from the PBoC and a broader global money supply expansion of $1.2 trillion, it appears that there is a coordinated effort to infuse the global economy with liquidity.
Jamie added that if we draw comparisons to previous cycles, the potential for Bitcoin to rally is very high. In 2017, during a similar period of liquidity expansion, Bitcoin rallied 19x. In 2020, it surged 6x.
While it’s unlikely that history will repeat itself exactly, the analyst argues that there’s a strong case to be made for a 2-3x increase in Bitcoin’s value during this cycle — provided the global money supply continues to expand, and the U.S. dollar index (DXY) drops below 101.
On Aug. 5, Bitcoin and other crypto assets suffered a sharp decline due to a market crash triggered by growing recession fears and the sudden unwinding of the yen carry trade. The impact was severe, with Bitcoin plummeting to as low as $49,000 and struggling to recover.
As of Aug. 19, Bitcoin is trading around the $59,000 mark, facing strong resistance between $60,000 and $62,000. The key question now is: where does Bitcoin go from here?
According to Hayes, for Bitcoin to truly enter its next bull phase, it needs to break above $70,000, with Ethereum (ETH) surpassing $4,000. Hayes remains optimistic, stating, “the next stop for Bitcoin is $100,000.”
He believes that as Bitcoin rises, other major crypto assets will follow suit. Hayes specifically mentioned Solana (SOL), predicting it could soar 75% to reach $250, just shy of its all-time high.
Supporting this view is Francesco Madonna, CEO of BitVaulty, who also sees the current market environment as a precursor to an extraordinary bullish phase.
Madonna highlighted a pattern he has observed over the past decade: during periods of uncertainty or immediate liquidity injections, gold typically moves first due to its safe-haven status.
Recently, gold reached its all-time high, which Madonna interprets as a leading indicator that the bull market for risk assets, including Bitcoin, is just beginning.
Madonna points out that after gold peaks, the Nasdaq and Bitcoin typically follow, especially as liquidity stabilizes and investors start seeking higher returns in growth assets.
Given that gold has already hit its all-time high, Madonna believes Bitcoin’s recent consolidation around $60,000 could be the calm before the storm, with $74,000 being just the “appetizer” and $250,000 potentially within reach.
With the U.S., China, and other major economies all injecting liquidity into the system, we’re likely to see increased demand for Bitcoin as investors seek assets that can outperform traditional investments.
If these liquidity measures continue as expected, Bitcoin could be on the verge of another key rally, with the potential to break through its previous all-time high and set new records.
