Bitcoin Analysis: Beyond the Block – July 2025

Today the Ainslie Research team brings you the latest monthly update on Bitcoin – including the Macro fundamentals, market and on-chain technical metrics and all of the other factors currently driving its adoption and price. This summary highlights some of the key charts that were discussed and analysed by our expert panel. We encourage you to watch the video of the presentation in full here for the detailed explanations. Bitcoin and Global Liquidity

Bitcoin is the most directly correlated asset to Global Liquidity. Trading Bitcoin can be thought of as trading the Global Liquidity Cycle, but with an adoption curve that leads to significantly higher highs and lows each cycle. As such, we look to buy Bitcoin during the ‘Bust’ phase or liquidity low, then rotate out of it during ‘Late Cycle’ where liquidity is overextended and downside protection is required (our preference is to rotate into Gold). When correctly timing and structuring the rotation, it is possible to significantly outperform ongoing monetary debasement. The Bitcoin cycle low was in November 2022, and since then, the returns have been unmatched by any other major asset.

Where are we currently in the Global Macro Cycle?

Welcome to the July edition of Beyond the Block.  In May, we reiterated buying the dip, though we did not expect Bitcoin to be breaking into new all-time highs this quickly. We remained constructive on where we thought liquidity was heading over Q3 and into year-end, though we are now expecting the cycle to continue well into 2026 due to the stop-start nature of liquidity in recent months. Growth and inflation across the global economy have also been slow to pick up, putting us in the ‘goldilocks’ scenario where liquidity is still growing, but governments will want to increase growth within their economies with fiscal stimulus.

Our Global Macro Cycle Indicator remains in the ‘Early Cycle’ phase, characterised by slowish growth and declining inflation. With trade tensions and economic uncertainty seemingly behind us, we anticipate a transition to the ‘Mid Cycle’ later this year as policymakers seek to stimulate sluggish economies, particularly in the US, ahead of the 2026 midterms.

US Growth remains lacklustre as inventory-driven production rebounds have not been matched by true demand strength. Services, the economy's main economic driver, are slowing. We admit that weak hiring and waning confidence pose potential headwinds for growth but remain upbeat that certainty around fiscal policy and trade wars, along with deregulation, will spur on innovation and consumer spending, eventually leading to growth.

Speaking of growth, something we don’t usually mention, but will certainly be a contributing factor over the coming years, is global investment in AI, power plants, data centres and semiconductors. A McKinsey analysis estimates the US will need a US$5.2 trillion investment in data centres by 2030 just to meet AI demand. 2025 alone has seen a 392 billion dollars capex spend by the top 11 tech firms within the US By 2035, US power demand from AI data centres could climb more than 30-fold to 123 GW (compared to 4 GW in 2024). The buildout of infrastructure required to support this increase of demand for energy is nothing short of extraordinary.

Let’s not forget, the US and China are indisputably in an arms race for AI supremacy, with rapidly escalating investments and explicit strategic competition. This rivalry is not just about creating advanced algorithms, but shaping economic futures, technological standards, and global influence. While the US currently leads in many metrics, particularly private investment, advanced models, and R&D scale, China’s state-coordinated push, fast model catch-up, and infrastructure scaling keep the race close and unpredictable. Money will need to be spent on both sides.

Official inflation data is now aligning with our months-long forecasts. Our leading indicator has consistently predicted US inflation trends, even as others expected higher levels. Official inflation data continues to surprise to the downside, mainly due to shelter actively helping to suppress inflation readings in 2024 and 2025, owing to both falling market rents and the lagged nature of housing data in inflation indices. This trend may persist in the near term, but any change in rent trends or supply-demand dynamics could restore upward pressure to inflation measures.

We maintain inflation has bottomed and it is only a matter of time before official inflation starts to pick up, particularly with statements like this from Secretary Bessent: “There is the potential growth of the debt, but what’s more important is we grow the economy faster. I inherited a 6.7% deficit as a percentage of GDP, and we’re trying to bring that down by decreasing spending, increasing revenue, and [growing] the GDP faster than the debt.”

Yup, they want to run the economy hot, and you can throw that ‘decreased spending’ out the window now the ‘One Big Beautiful Bill’ has been signed into law, lifting the debt ceiling to 41.1 trillion, an additional 5 trillion. Remember, higher liquidity, growth, and inflation will shift our Macro Indicator into the 'Mid Cycle' phase, then eventually, toward 'Late Cycle.' Inflation, in this environment, is a positive signal for risk assets.

Where are we currently in the Global Liquidity Cycle?

A historical illustration of Global Liquidity cycles since 1970 shows the ebbs and flows of liquidity and its impact, both positive and negative on financial markets. When liquidity is scarce, currency, banking and sometimes financial crises can follow. On the other hand, when liquidity is abundant, global markets experience asset booms.

Governments and central banks, rightly or wrongly, try to smooth the business cycle by adding liquidity during deflationary busts and removing it during asset price booms. We would argue they are failing at their mandate of ‘smoothing’ the business cycle, though it does present opportunity when trading assets such as Bitcoin. 

The "Global Liquidity and Bitcoin Sensitivity" chart highlights Bitcoin's unique position. With a sensitivity historical multiplier of over 9 times to a 10% global liquidity shock (5 times in the 18 months). A 10% increase in liquidity tends to drive Bitcoin up by around 50%, based on its typical 5x sensitivity. That’s significantly higher than traditional assets like gold (2x), silver (3x), or equities such as the S&P 500 (1x). This high sensitivity allows Bitcoin to capture outsized gains during liquidity expansions, making it an ideal asset when central banks and governments inject money into the economy. Its decentralised nature and limited supply further enhance its appeal as a hedge against inflation and currency devaluation. Thus, Bitcoin stands out as a powerful tool for maximising returns in a liquid financial environment.

Liquidity growth from central banks has started to pick up. What’s particularly encouraging is the pickup from both the US and the PBOC (People’s Bank of China), who historically have had the largest impact on our liquidity index.

Last month, we said, “The PBOC is actively adding liquidity to markets in 2025 to support economic growth amid trade tensions and waning market confidence. Recent measures include injecting 1 trillion yuan (US$139 billion) via reverse repo operations and reducing the reserve requirement ratio (RRR) by 0.5 percentage points, releasing approximately 1 trillion yuan in long-term liquidity. The PBOC has also cut interest rates by 10 basis points and introduced a 500-billion-yuan swap facility for non-bank institutions to boost stock market funding. These steps aim to maintain ample liquidity, stabilise financial conditions, and encourage lending and investment.”

Well, the PBOC has just stepped up their liquidity forecasts and injections again. In July, China’s fiscal stimulus totalled over US$320 billion in new issuance and more than US$1.5 trillion in special bond/fiscal activity for 2025, with front-loaded impacts aimed at stabilising growth and supporting consumption. The US has also passed the ‘One Big Beautiful Bill this summer, but its short-term direct stimulus is modest compared to China, with most effects felt over several years rather than immediate new stimulus outlays.

It is important to note that liquidity injections from the US and China have varying degrees of impact on different parts of the economy. US liquidity has a larger impact on financial markets, whereas Chinese liquidity is generally aimed at the real economy. Regardless, excess liquidity in all forms eventually finds its way into financial asset

Liquidity growth has continued over the past month, though it may start to slow due to the fast rate of change this time last year. That’s not necessarily a bad thing as liquidity is still growing at a positive rate, currently 6.8%. Going forward, we may see a continued slowdown before the rate of change really starts to pick up again. Watch this space.

There have been some revisions to our liquidity data from last month, which in hindsight make sense based on where bitcoin is currently trading. June suggested liquidity on a nominal basis was subdued. We were confident in buying the dip but didn’t expect a breakout to US$123,500. As it stands, bitcoin is trading around fair value, though we do expect liquidity to continue expanding throughout the year; therefore, we will continue to buy the dips.

The GENIUS act, good for America, even better for Digital Assets.

In an era of short attention spans and fast-moving price action, it’s easy to miss the forest for the trees. One day, crypto investors will look back at “Crypto week” as one of the most significant moments in history, for broad digital asset adoption. The GENIUS Act legitimises stablecoins and draws institutional capital. The Clarity Act will result in easier compliance, more innovation and market trust. Finally, the Anti-CBDC Act signals privacy and supports decentralised assets. 

By requiring stablecoin reserves to be held in highly liquid, dollar-denominated instruments, the GENIUS Act channels global capital into US Treasuries, reinforcing the dollar’s dominance and extending US dollar liquidity worldwide through digital rails. The result is a more robust, predictable environment that incentivises global capital flows into crypto, which also fosters greater adoption, while reducing friction in the ecosystem. By the way, the GENIUS Act is also fantastic for liquidity, as the majority of stable coins will back highly liquid Treasury Bills, allowing the government to continually finance itself and run larger deficits.

Don’t just take it from us, Scott Bessent has publicly stated it.

“A thriving stablecoin ecosystem will drive demand from the private sector for US Treasuries, which back stablecoins. This newfound demand could lower government borrowing costs and help rein in the national debt. It could also onramp millions of new users – across the globe – to the dollar-based digital asset economy.”

And

“a win-win-win for issuers, the Treasury, and consumers because payment coin reserves would sit largely in short-dated US Treasuries, lifting demand for the securities and easing financing pressure.”

Bitcoin ETF AUM continues to climb aggressively, led primarily by BlackRock's IBIT. But it’s not just the ETFs that are hoovering up Bitcoin.

Both of these charts are already out of date. That’s how quickly treasury companies are coming to market and aggressively buying spot Bitcoin. At time of writing, Strategy has just purchased an additional 6,220 Bitcoin while also announcing Stretch, a new Perpetual Preferred Stock via IPO. Sequans, a semiconductor company, purchased an additional 1,264 Bitcoin at the start of the week, and Trump Media is now the fifth largest Bitcoin treasury corporation with 18,430 Bitcoin.

Lastly, Fairshake is currently the largest cryptocurrency-focused Political Action Committee (PAC) in the United States, establishing itself as a significant political force in the crypto industry. Backed by major players such as Coinbase, Andreessen Horowitz (a16z), Ripple Labs, Jump Crypto, and Uniswap Labs, Fairshake has raised substantial funds, amassing over US$260 million from January 2023 to December 2024. This financial strength provides the crypto industry with unprecedented leverage in Washington, fundamentally reshaping how lawmakers approach digital asset policy.

The digital asset sector now has a powerful voice that is growing increasingly influential. Fairshake's impact was evident in the 2024 elections, where it supported candidates who won 33 out of 35 House and Senate primary races it entered. With approximately US$141 million in cash reserves for the 2026 midterm elections, Fairshake is well-positioned to continue advocating for pro-crypto candidates and policies, potentially driving further positive legislative outcomes for the industry.

Conclusion

Tying this all together, Bitcoin’s latest rally is a direct consequence of the liquidity wave we saw swelling through Q2 and into the US summer. When we stressed “buy the dip” back in May, we didn’t expect such a quick run to new highs. This cycle’s stop-start nature, alongside tepid growth and soft inflation, means policymakers still want to run the economy hot (even if the path is messy), and the result is a global liquidity backdrop that continues to favour Bitcoin and risk assets.

The fiscal arms race between the US and China—not just over tech and AI, but over who can inject more liquidity—has real consequences for all asset classes. US spending and stablecoin legislation (GENIUS, Clarity, Anti-CBDC Acts) aren’t just regulatory footnotes; they’re pushing global capital flows directly into dollar-based crypto rails and, ultimately, into Treasuries. That’s reinforcing dollar dominance at the same time it’s making the crypto ecosystem more attractive for big money.

Let’s be clear, neither inflation nor growth are dead. The massive investment wave in AI, data centres, and energy is just starting to hit. Once these projects roll off the drawing board and into the real economy, expect growth (and underlying inflation) to grind higher. That’s good news for Bitcoin, historically one of the main beneficiaries in reflationary, liquidity-rich environments.

At the end of the day, macro still sets the tempo. Central banks, policymakers, fiscal surprises, and new regulatory rails will keep driving flows. For now, positive liquidity keeps the wind at Bitcoin’s back and keeps this market interesting. Stay patient, keep an eye on the liquidity gauges, and don’t lose sight of the bigger picture.

Watch the full presentation with detailed explanations and discussion on our YouTube Channel here:

Until we return with more analysis next month, keep stacking those sats!

Joseph Brombal
Research and Analysis Manager
The Ainslie Group

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