Bitcoin

Think of it this way

It is the sponge of the system. When there is liquid to spare it absorbs it faster than anyone, and when the system dries up it also releases it faster than anyone.

What is Bitcoin?

Daily closing price of bitcoin in dollars.

How to read Bitcoin

It is overlaid on any macro chart for visual comparison. When several assets are turned on at once, they are all rebased to 100 so their shapes can be compared.

What Bitcoin means for the market

Bitcoin is an asset with no cash flow, no central bank and a fixed supply. That makes it the purest receiver of excess liquidity: when there is surplus money it rises more than anything, and when money is short it falls more than anything. It is the most sensitive of the four assets we track, but also the noisiest.

Where the money flows

No money is created or destroyed in the system here: it changes hands between buyers and sellers. If you buy a bitcoin for 100,000 dollars, those 100,000 move from your account to the account of whoever sold it to you. What does happen is that when there is more money looking for somewhere to go, part of it ends up here and pushes the price.

What to watch in Bitcoin

Turn it on over any liquidity series and use the lag to see whether the relationship exists in that particular period. Do not take it as constant: there are stretches in which they move together and stretches in which they have nothing to do with each other. The useful reading lies in sustained divergences, when the price rises for several weeks while liquidity is falling, because those stretches have tended to correct.

A reference asset. The most sensitive to liquidity of all those we track.