How Liquidity Affects Crypto Prices – Explained Simply

"currently How expects global liquidity to peak somewhere around the third quarter of 2025 which uh as it so happens lines up closely with many predictions for this cycle top sometime later this year"

"However, the affforementioned new cryptospecific sources of liquidity could make the next bare market even more severe than the previous cycles as we saw vividly during the events like the terra collapse and the FTX meltdown massive leverage can lead to brutal liquidations when liquidity eventually tightens"

"over longer periods of time say months to years Bitcoin remains highly correlated with global liquidity but in shorter periods cryptospecific factors like leverage and speculative excesses often cause substantial deviations both upwards and downwards"

"in other words liquidity sets the direction but leverage and investor psychology determine how extreme price moves become"

"this crypto market cycle could be the first in history where we see widespread borrowing against major altcoins like XRP and ADA as well as tokenized real world assets or RWAs for short"

"we might even see new crypto regulations enabling traditional institutions like banks to offer loans against assets such as Bitcoin ETFs"

"in practice though the best strategy isn't just picking one indicator and running with it instead experienced investors tend to cross reference multiple sources"

"speaking of Ben Cowan he's recently made an interesting point suggesting that crypto markets might sometimes front r run global liquidity measures in other words investors anticipate improving liquidity conditions and start pricing in future liquidity growth ahead of time causing crypto prices to either match or temporarily run ahead of existing liquidity measures"