Macro is in control of Bitcoin, so watch out for a liquidity crisis

Bitcoin correlations report, September 2023

The spot Bitcoin ETF is no longer driving the market. Macro is back in control with all the uncertainty that it brings. And what that really means is you should be careful of the risk of a liquidity crisis as we are moving towards a recession.

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Bitcoin correlations report, September 2023

Every month in the Bitcoin’s correlation report we examine a set of correlations and trend similarity metrics to understand what is driving Bitcoin’s price action and what you need to pay attention to. This is our report for August 2023.

The takeaway

The data points to Bitcoin being mostly driven by macro over the past 90 days:

• Assets that are directly tied to BTC have a strong correlation and trend similarity score.

• The US dollar strength and bond yields are mirror images of BTC.

• Everything else is basically uncorrelated to BTC.

So saying it differently, Bitcoin is currently more influenced by the macro narrative than any other factor.

The other important takeaway is that there are some market events making all assets correlated over a (more or less) short period of time.

Especially during a liquidity crisis you cannot rely on the typical correlation regime of any pair of assets.

Which is why as we are getting closer to the danger zone for a recession in the US you should get prepared to manage your positions as if they are all the same.

But let’s look back at 2020 to see what that really means.

The importance of liquidity