Lyn Alden, founder of Lyn Alden Investment Strategy, recently shared her views on the economy’s main drivers leading into 2025 and her positive outlook on Bitcoin for the coming year.
Liquidity and Its Impact
In an interview with David Lin, Alden said that she believes that global liquidity will improve in 2025. She notes that the U.S. appears to be moving past a peak in credit tightening, which is a positive sign for liquidity. Additionally, increased stimulus from China supports this view. A key factor to watch is the U.S. Treasury General Account (TGA). If $800 billion returns to the banking system, it could significantly boost liquidity, but this depends on whether there are complications with the debt ceiling.
While Alden doesn’t predict the exact scale of liquidity changes, she remains moderately optimistic for the next year. This positive liquidity outlook directly influences her view on Bitcoin.
She said, “I don’t have a strong opinion on the magnitude, but I have a positive view on liquidity for the next 12 months, and therefore my view on Bitcoin is also positive for the next 12 months. They have a lot of correlation together. The few times we see Bitcoin break its correlation with liquidity are often due to valuation extremes.”
Bitcoin Valuation Metrics
Alden explained the strong correlation between Bitcoin’s performance and global liquidity. In her analysis, when Bitcoin diverges from this correlation, it typically relates to extreme valuations. She prefers measuring Bitcoin’s value using the market cap to realized cap ratio.
- Market Cap: Current price multiplied by the total number of coins.
- Realized Cap: The total value of all coins based on their last transaction price.
During bull markets, market cap can significantly exceed realized cap, hinting at potential overvaluation. On the flip side, lower market cap compared to realized cap suggests less risk. She said, “So, looking at all this, I expect liquidity to go up over the next year, and I don’t see signs of extreme Bitcoin valuation. That combination generally leads me to be pretty bullish on Bitcoin.”
