The liquidity of cryptocurrencies has quietly improved; let's go, and by the end of the year, we’ll reap the rewards. Figure 1: The Federal Reserve and central banks say the hardest words while releasing the most water; the M2 index has already bottomed out and stabilized, while the returns on Bitcoin are positively correlated with M2, just with a time lag. Figure 2: The ISM PMI manufacturing index also maintains balance with the Bitcoin cycle; both interest rate hikes and cuts are essentially a game of boiling frogs in warm water. The challenge is to maintain a keen sense at the turning point; it’s painful that liquidity has improved but remains unnoticed, and here it comes. Figure 3: The stablecoin printing machines USDT and USDC have formed a platform and stabilized; although there hasn’t been significant growth, at least it shows that funds in the crypto space are no longer massively flowing out, partly thanks to government bonds—RWA has also introduced a risk-free yield to the crypto space, while in the US stock market, funds can no longer compete with the crypto market. Figure 4: Grayscale's negative premium has stabilized since the beginning of the year and has gradually risen from -40% to -10% in 2023. This indicates that outside funds are eagerly entering the market in anticipation of spot ETFs before January next year. This also confirms that true old money will not buy at high positions when ETFs are approved; the timing of ETF approval will be a temporary bearish signal. Figure 5 reviews the launch of gold ETFs, silver ETFs, CME Bitcoin futures, and Bitcoin futures ETFs, all of which occurred at short-term peaks. However, to return to the point, the convergence of Grayscale's premium is a sign that old money is injecting liquidity into the crypto space through over-the-counter transactions, and the channels are not limited to Grayscale; old money is entering the market in places you cannot see. Figure 5 is actually a benefit for everyone; by comparing the launch times of gold and silver ETFs and their strength relationships, one can judge when the altcoin season in the cryptocurrency market will fully arrive. I won’t elaborate on this; the word count is already sufficient. I’ll discuss it in the next article. Finally, liquidity is not just a single point. In fact, the cryptocurrency ecosystem has been continuously expanding into what we call the traditional world over the past year. However, those who have been in the circle for a long time may not feel the significant changes, such as AI + blockchain, RWA government bond dollar stablecoins, web3 games, and spot ETFs, all densely packed in the next couple of years. This is a singular moment that will bring incremental funds to cryptocurrencies.

Is this time really different? I will gradually exit the liquidity in the crypto space from May to June 2024. What will be effective? Technical analysis, halving SF2 model, four-year cycle theory, macro analysis, on-chain data, etc., there is always something that has perfectly "phased in" during past cycles; mechanically seeking the end point like carving a boat to find a sword, this cycle may ultimately be ineffective. For example, taking most indicators and cycles, the reference four-year halving has actually been advanced this time, just in a different form; since ETFs can boost Bitcoin prices from the demand side, it is actually similar to the past where the supply side was beneficial for prices. The supply-demand imbalance brought by the halving in April-May has been advanced to January with the ETF approval, and this is just one of the factors that need to be corrected. Other reference factors for supply imbalance include whether ETFs can bring sustained capital demand? Does the marginal reduction in supply-side halving and the increasing total market cap have little impact on the supply side?... In general, considering the supply-demand imbalance, this "fast cycle" may end faster, possibly 1-2 quarters earlier, but this "slow cycle" long bull (tentatively assumed to exist) will recover faster under the influence of ETFs. However, after recovering to the "slow cycle" long bull, the difficulty of investing in the crypto space will rise to a king-level hell, second only to the stock market. How to participate and in what form needs to be considered. Furthermore, with the increasing proportion of professional traders, many players reference the Federal Reserve, macro liquidity, and U.S. stock market indicators. Most market views believe that the liquidity expectations brought by the Federal Reserve's interest rate cuts will extend the bull market cycle. However, recalling the starting point of this bull market, which originated from the SBV Silicon Valley Bank crisis, is it the crisis that brought more capital inflow into Bitcoin or the increased liquidity from interest rate cut expectations? The starting point of confidence is worth pondering: is it the chaos of the external world or the tranquility brought by interest rate cut expectations? Additionally, the chaos and misalignment among various macro cycles, economic cycles, and credit cycles mean that there are no fools in the market; let the anticipation of this interest rate cut be fully priced in, while the actual moment of rate cuts may signal the end of this fast cycle. When the external environment is flourishing, I do not believe it is the time for Bitcoin to shine. On the contrary, the more chaotic the macro and world situation, the more valuable Bitcoin becomes; this is an unchanging main line. Considering the timeline, the halving at the end of April 2024, the Ethereum ETF deadline on May 23, and the first interest rate cut expectation in June, I will start to gradually exit most of the liquidity in the crypto space from May to June; then I will make a comprehensive asset allocation adjustment plan, thinking about risks, exits, and changes, retreating to advance. Interestingly, today I came across a tweet from senior HalfWS regarding exiting the crypto space; purely from the conclusion, I haven't seen any liquidity exit plans that are so advanced in the circle yet, which gives me confidence, but I wonder if there are any logical similarities. After two weeks of silence, I will provide six clues that confirm the arrival of the altcoin season, which will be particularly valuable in the coming months, and I will release them in the next few days.