Bitcoin price closely correlates with global liquidity growth, with liquidity explaining up to 90% of its price movements, as per Raoul Pal, a notable analyst. In the long term, global liquidity continues to expand due to increasing debt levels in many countries. On a shorter timeframe, global liquidity follows a cyclical pattern, with Michael Howell projecting the current cycle to peak by mid-2026. Bitcoin’s sensitivity to global liquidity has been a key factor driving its recent surge above $100,000. Raoul Pal highlighted the strong correlation between Bitcoin and global M2 liquidity, stating that rising liquidity significantly impacts asset price action. He emphasized that expanding liquidity influences a large portion of Bitcoin’s price action and the Nasdaq’s performance. Additionally, Pal noted that Bitcoin has delivered an average annual return of 130% since 2012, making it a compelling investment despite its volatility. Global liquidity is primarily driven by the expansion of the money supply, fueled by growing debt levels in fiat currency systems. The long-term trend indicates structural growth in global liquidity, although shorter-term fluctuations occur due to specific drivers like the US Federal Reserve, the People’s Bank of China, and collateral market lending by banks. Howell also pointed out indirect influences like the world business cycle, oil prices, dollar strength, and bond market volatility, which impact liquidity with a lag. The recent growth in global liquidity is attributed to the weakening world economy, prompting central banks to inject liquidity into the system. However, economic uncertainties, rising US Treasury yields, and bond market volatility may pose challenges to liquidity expansion in the future. Despite a potential downturn in 2026, global liquidity is expected to remain robust at least through 2025, which could benefit assets like Bitcoin. Howell’s liquidity cycle aligns with Bitcoin’s halving cycle, hinting at a significant price move in the near future. Investors should conduct thorough research before making any investment decisions, as this article does not provide investment advice.