Bitcoin: The Liquidity Paradox
Benjamin Cowen examines why Bitcoin has not matched all-time highs in global M2 and the stock market, arguing that Bitcoin responds more closely to global net liquidity than to total money supply. He concludes that subdued central-bank balance-sheet growth explains Bitcoin's relative underperformance, the lack of an altcoin rotation, and its less severe drawdown, while a future increase in net liquidity could prompt Bitcoin to outperform.
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Read the Full SummaryKey Points
Benjamin Cowen argues that Bitcoin's performance should be evaluated against the flow or rate of change in liquidity, rather than simply whether global M2 is at an all-time high.
The episode defines global net liquidity as an aggregate of major central-bank balance sheets, adjusted for the reverse repo facility and the Treasury General Account, to gauge whether financial conditions are supportive or restrictive.
Cowen says global net liquidity is roughly $25 trillion, about $5 trillion below its 2022 level of approximately $30 trillion, leaving it well below the highs seen in 2021 and 2022.
He argues that a stronger dollar can reduce the dollar-denominated measure of global liquidity, while a weaker dollar can increase it because foreign-currency purchasing power rises relative to the dollar.
Bitcoin Liquidity Paradox
Cowen introduces Bitcoin’s apparent underperformance despite record M2 and near-record stock prices, arguing the episode will distinguish total money supply from more relevant liquidity conditions.
M2 Versus Bitcoin
Bitcoin has not matched M2 or stock-market highs because total money supply ignores liquidity flows, rate of change, and the conditions that historically determine Bitcoin’s relative performance.
Global Net Liquidity
Cowen defines global net liquidity using major central-bank balance sheets minus reverse repos and the Treasury General Account, showing why this measure better captures supportive or restrictive conditions.
2019 Liquidity Parallel
Bitcoin previously stalled during weak net-liquidity conditions in 2019, then accelerated when central banks expanded their balance sheets, while AI-led stock-market strength has limited pressure for new monetary support.
Bitcoin Relative Underperformance
Cowen argues Bitcoin has underperformed stocks because central-bank balance sheets remain well below 2021 levels, even though M2 continues setting records.
Apathy And Altcoins
Persistently low net liquidity explains the absent altcoin rotation, Bitcoin’s apathetic cycle top, and its shallower drawdown; renewed liquidity growth could eventually restore Bitcoin outperformance.
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Important Disclaimers
Not Investment Advice: For education only — not financial, tax or legal advice.
AI-Generated: Made by AI from source transcripts and may contain errors.
No Guarantees: Past performance does not predict future results; investing carries risk.
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