Original Author:
@DistilledCrypto
Translated by: Deep Tech Flow
When will liquidity flow into the market?
Thanks to liquidity, more money entering usually means higher cryptocurrency prices.
However, the current market remains dry, with no sign of the “rising tide” in 2021.
I delved into the insights of macro expert CG (@pakpakchicken) to uncover some clues.
Influenced by Policies
@pakpakchicken spends hours tracking policy changes every day, “Policy drives liquidity, liquidity drives assets, assets drive GDP… and so on.”
His conclusion is: the biggest risk comes from the upside.
@CryptoHayes and @RaoulGM also agree on this point.
An Overlooked Insight
@pakpakchicken points out that few are discussing the expected weakening of the US dollar.
He predicts a coordinated devaluation of the dollar in the future, which could increase liquidity.
As a background story, let’s review the events of 1985.
The policy background around 1985 will help understand the mindset of policymakers:
→ Tight monetary policy
→ High long-term interest rates
→ Strong dollar (exploring the “milkshake theory”)
→ High deficits
Unprecedented Volatility
With the approaching season of volatility, @pakpakchicken predicts extreme turbulence.
This will be driven by the need for the US to repay $35 trillion in debt.
Why Volatility is a Good Thing
@pakpakchicken believes that volatility is not a flaw but an ideal feature for profits.
A lot of money is made in short-term bursts.
Sideways movements will shake out ordinary investors, while the market will rise when you give up.
The Impact of Debt on Cryptocurrency
To manage its massive debt, the US may increase liquidity to devalue its currency.
This will ensure that debt rollovers are manageable, as without these controls, yields could spiral out of control.
Larry Fink’s Viewpoint
When discussing national debt, BlackRock CEO Larry Fink mentioned:
No matter how the US increases taxes or reduces debt, these measures are insufficient to solve the national debt problem. Therefore, he emphasizes the importance of building new infrastructure. He believes that by constructing new infrastructure, not only can economic growth be promoted, but also the foundation for future development can be laid.
CG (@pakpakchicken) believes that as long as the US dollar remains stable, institutions will tokenize all assets.
CG’s Macro Update (Late Q2)
At the end of the second quarter, the US weekly liquidity support per operation reached $20 billion, with QT decreasing from $60 billion per month to $25 billion.
The US policy has increased the issuance of short-term bills, while the Chinese yuan may face devaluation.
The Growth of Trillions in Chinese Yuan Liquidity
Could benefit cryptocurrencies, with looming currency devaluation due to deflation of goods, services, and asset values, all pointing to a potential bullish second half of the year.
US Treasury Repurchase
Starting from May 29th, the US Treasury repurchase, with weekly liquidity support repurchases soaring to $20 billion, could amplify cryptocurrency prices during the chaotic election season.
CG (@pakpakchicken) believes that an upward trend may emerge in the second half of 2024.
Index-Level Summer
@pakpakchicken is dedicated to positioning cryptocurrencies as a leading asset class. However, he emphasizes, “The market may remain irrational longer than you can remain solvent.” The future of global liquidity surge is on its way…
Narrative Fatigue
CG (@pakpakchicken) emphasizes that narrative understanding is key.
Narratives drive the market until the value of the narrative is exhausted.
CPI/inflation narratives are weakening; recent reports lack impact.
The Next Mainstream Focus
With bank reserve shakeups, employment becomes a focus, with rate cuts coming earlier than expected.
TLDR: “Stay long-term.”
The Most Painful Market Trend
With macro forces converging, following market rules, CG expects the emergence of the “most painful market trend.”
PS:
The concept of the “most painful market trend” in the financial markets refers to the price movement path that causes the most pain and distress to most investors during a specific period. This logic behind this concept is that the market often chooses price movements that amplify losses for most investors, driven by factors such as market manipulation, institutional investor strategies, and underlying supply and demand relationships.
Signs Before Heading Towards the “Most Painful Market Trend”
Retail sector is not prepared for an uptrend yet
Many influential individuals claim the market has peaked
Market makers shorting
Overwhelming bearish positions
The end result is likely to see a significant uptrend.
Betting on $ETH
CG (@pakpakchicken) believes that $ETH will stand out in the upward cycle.
As Larry Fink pointed out, debt is unsustainable in the long run.
While the dollar holds value, everything will transition to tokenization.
Only one L1 has stood the test of time and has the highest adoption rate so far – $ETH.
Respecting Probabilities
Although CG (@pakpakchicken) leans towards an uptrend, further declines are not impossible. Macro expert @fejau_inc sees economic growth slowing as a fundamental, and he believes there is a significant downside risk not seen since 2019.
When will the rising tide come as market liquidity remains scarce