Bitcoin Analysis: Beyond the Block – April 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 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 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 over-extended 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 April edition of Beyond the Block. Just when we thought the world couldn’t get any crazier, the madness went parabolic. The good news is we believe markets have reached an inflection point with some subtle and some not-so-subtle policy changes. In the concluding thoughts of last month’s article, we were somewhat cautious as we believed there was the possibility of another leg lower.

“What matters is how much more pain in the markets they are willing to tolerate before it starts to negatively impact the desired goal of reducing the government deficit. We happen to think if there were to be another significant leg down in the markets, that’s where we would see a pivot from the Trump administration or possibly even the Fed. That would be the time to really be backing up the truck on risk assets.”

Our caution has paid off as we were able to take advantage of Bitcoin making a fresh low at US$75,000. A falling dollar and easing financial conditions have us firmly placed in ‘Mid Cycle’ as liquidity makes a resounding recovery from the lows.

US economic growth, as measured by the ISM data, is a useful tool to forecast the trajectory of the economy moving forward. Despite lingering bearish sentiment, the economy may be approaching a turning point. Our thesis of "peak bearishness" suggests markets have already accounted for many of the worst-case scenarios. As economic data continues to deteriorate, with growth slowing and unemployment rising, the Fed’s hand will be forced into lowering rates to boost growth and backstop the economy. Additionally, uncertainty around tariff policy from the Trump administration cannot be ongoing due to the negative effects it creates on business activity. He, too, will be forced to pivot on what was previously seen as staunch policy.

Inflation continues to fall from last month on our leading indicator. We have maintained that inflation will not be a problem at this point in the cycle, regardless of tariff policy. Yes, on the surface, the higher costs of importing goods should raise inflation; however, these inflationary pressures are being offset by lower consumer sentiment, falling asset prices, and a slowdown in discretionary spending, which includes airfares, hotels, and restaurant activity. As we said last month, lower oil prices will also exert downward pressure on energy and inflation. Though oil has seen a bounce off the lows, it is still trading lower than it was a month ago, which will be reflected in lower inflation data in the coming weeks.

Where are we Currently in the Global Liquidity Cycle?

Before getting into where we think liquidity is heading for the rest of this year, we will touch on why it is important to own assets in the first place. Owning assets is crucial when paper currency is debased and liquidity rises because they serve as a hedge against inflation, preserve wealth, and help mitigate losses during economic fluctuations. The chart underscores this by showing that asset values tend to grow with rising liquidity, offering a safeguard against the declining value of paper currency. The liquidity cycle moves in ebbs and flows, allowing investors like us to benefit during liquidity lows by purchasing cheap assets while giving us a ballpark indicator for when to sell overpriced assets.

As we have discussed in previous articles, Bitcoin is the asset to own in times of liquidity expansion. Over the past six months, gold has performed exceptionally well as it front-runs global liquidity (more on this later). Gold will continue to benefit as liquidity rises, and Bitcoin will quickly play catch-up as financial conditions ease and risk-taking increases. We believe Bitcoin’s time has arrived, with a very positive outlook for price action into the second half of 2026.

Most central bank liquidity has once again come from the US, with another large drawdown of the TGA into tax season. With the TGA now completely drained and currently being filled by tax receipts, we do not see liquidity easing continuing at this rate from the US With potentially lower-than-expected tax receipts from a slower economy, a falling market, and diminishing capital gains (25% of tax receipts are connected to the stock market), the US Treasury could find itself quickly issuing bonds to cover the deficit. Large-scale bond issuance, particularly 10-year bonds and longer, will have negative impacts on liquidity.

Scott Bessent, the Treasury Secretary, is aware of the fiscal predicament the US and the current government find themselves in. He was recently quoted as saying, “We have a big toolkit. We do buybacks. I think if Treasuries hit a certain level or if the Federal Reserve believed that a foreign—I won’t call them an adversary—but a foreign rival was weaponising the US government bond market or attempting to destabilise it for political gain, I am sure that we would do something in conjunction with each other, but we just haven’t seen that.”

In other words, if bonds get out of control for any reason, we will issue new debt ‘on the run’ to purchase old debt ‘off the run’ to stabilise the market. Additional policies that will allow the Treasury to improve liquidity conditions in the bond market include:

• More bill issuance; short-term debt is more desirable but needs to be rolled more regularly.
• The GENIUS Act, a stablecoin bill to fulfil the demand for dollars and thus Treasuries outside of the US
• Expansion of the SLR so Treasuries essentially account for 0% against it, allowing banks to market-make and warehouse more bonds and create demand.

The other key player going forward for the rest of the year will certainly be China. While the dollar has had a sharp decline over the past two months, the Chinese yuan has been remarkably stable against the dollar, which is triangulated with a large devaluation in the yuan, particularly against gold. With Chinese bond yields reaching historic lows, there is plenty of room for authorities to stimulate an otherwise stalling economy—something we are paying close attention to!

This chart highlights the stop-start nature of global liquidity momentum during this cycle. Remember, risk assets correlate with a lag to liquidity. Though only slightly positive, liquidity momentum continues to turn higher after hitting an air pocket in Q1, leaving plenty of room to move higher in risk assets in the second half of 2026.

The recent surge in global liquidity can be largely attributed to the depreciation of the US dollar. A weaker dollar reduces borrowing costs, making it more affordable for investors to borrow in dollars and invest in assets denominated in other currencies. This dynamic often encourages investment in riskier assets, easing financial conditions worldwide and boosting liquidity across global markets. This chart is already out of date, with Bitcoin now trading over 90 thousand dollars.

Last month, we said, “As investors, this is where our resolve is tested. Global liquidity is reasonably stable, yet markets are clearly rattled by escalating uncertainty. Of course, there is always the possibility of another leg down; in fact, we are arguing that’s what needs to occur in traditional markets to see a policy change. That said, our future selves are highly likely to not be disappointed accumulating Bitcoin in the low 80-thousand region.”

A fantastic trade so far.

Reaching Peak Bearishness

Bitcoin ETFs have experienced a noticeable decline, slipping from approximately 516,000 Bitcoin to around 500,000. Despite this decline and the challenging market conditions—characterised by negative price action and prolonged negative funding rates—it’s striking how resilient these inflows have remained, especially given the compressed premiums on futures contracts. This resilience suggests sustained institutional interest, whether for long-term investment or strategic trading, underscoring the ETFs’ ability to weather adverse conditions and maintain substantial Bitcoin holdings.

With only 3.3% of days since 1978 having shown more extreme ‘Risk Off’ readings, investors’ mood typically does not reverse quickly following a sharp fall. However, it is fair to expect a modest recovery, or at the very least stabilisation after such extreme negative sentiment. We see it time and time again in risk assets, particularly Bitcoin, sellers are exhausted and markets ‘climb a wall of worry’ when the worst is already priced in.

Another metric to add to our bullish sentiment is the SSR chart. The stablecoin supply ratio is calculated by dividing Bitcoin's market capitalisation by the total market capitalisation of all stablecoins. When the Stablecoin supply ratio is low, it suggests a large supply of stablecoins compared to Bitcoin, indicating potential buying pressure for Bitcoin.

Most readers would be aware of the recent parabolic rise in the gold price. Driven by political unrest, further loss of faith in paper currency and central bank buying, gold has left anyone waiting for a pullback in its dust. Why are central banks buying? They are front running the inevitable debasement of paper currency as more debt is required to pay off old debt. As central banks buy gold, it makes sense it would appreciate first. Bitcoin will then follow, benefiting greatly from currency debasement and the rising liquidity conditions required for the financial system to absorb new debt.

Last month we touched on why the US stock market IS the economy, and Trump knows it!

With the stock market crumbling and the bond market in complete chaos, Trump had no choice but to flinch on their hard-line tariff policy. Though China was not spared in the exemptions, or 90-day tariff pause, the worst is already priced in. The final chart of this month shows a marginal reduction of 568 billion to the deficit if rates were to be cut by 2%. However historic data shows that a recession adds 1.28 trillion dollars to the by way of lower tax receipts from reduced capital gains and additional unemployment benefits.

Crashing the economy for the sake of getting lower rates is like burning the house down to cook the steak.

Conclusion

Most of the economic uncertainty around tariffs has now eased and it’s clear that a move back to the volatile policy of the last month will not be well accepted by the bond market. Whilst there is still uncertainty around China's vs US economic policy, we believe the worst is priced in, raising tariffs again would only have a marginal effect, if any on markets. Any positive news and/or certainty would be highly beneficial to Bitcoin.

World growth continues to slow, though this is already well understood and is likely priced in. The market will front-run any stimulus from central banks and government policy. Inflation is still currently subdued allowing headroom for authorities to enact this stimulus. Like other risk assets, Bitcoin should benefit greatly from improving liquidity conditions and economic certainty.

There is a high likelihood that Bitcoin has made a bottom at US$74,500, with negative sentiment, positioning and volatility reaching extremes. It is worth noting that Bitcoin and other risk assets were not able to make a new low during the trade war escalation between the US and China (raising tariffs to 145%). When the market stops going down on bad news, it's time to pay attention.

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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