Lark Davis on global liquidity and crypto

Transcript

liquidity is the rising tide that lifts all boats in the market and that's what we're getting we have more waves coming in than ever before GM good morning welcome to the milroad show The Daily crypto show that gives you the same feeling as finding money in your old pair of jeans I'm your host Jay Hamilton and today we're talking about one of the most important indicators for successful investors I'm talking about liquidity and there are some very interesting numbers and some very promising upside that is happening right now that we're going to dive in today and here to guide us is Lark Davis he's one of the smartest Minds in crypto investing and investing in general with millions of followers across YouTube and Twitter

absolute pleasure to have you Lark welcome to the remote cor radio show thanks for having me on Jake excited to get the chance to talk to you oh super excited okay let's start with what are your key indicators as an investor that you look at on a regular basis when we're talking about crypto specifically there's a few a few very interesting things that I like to look at you know there's all the classic stuff RSI right like we just got an oversold RSI reading on the daily for Bitcoin it's like hello like you know pay attention people stuff like that I find to be pretty good it historically has played out pretty well I like to use Simple indicators I'm a simple guy right I look at uptrends as market up trending are we ranging sideways are we trending down what kind of time frames are we looking at here

macd is always a great indicator for sort of momentum that's building up in the market weekly can really help smooth things out daily tends to provide a lot of noise but weekly tends to smooth things out but you know that's all sort of like daytoday week to week and that's important I love talking about the noise come on it's like talking about the weather one of my favorite topics what's the price Bitcoin doing today but when we talk about the big game what's actually moving this entire cycle along it's liquidity and that's I think something that people cannot ignore in the market because if you don't have money coming into the market prices of your assets are probably not going to go up right you have to understand S&P 500 is where it all starts right that's the

big slow moving thing tax stocks are a Beta to that bitcoin's a beta to tax stocks ethereum's a beta to bitcoin altcoins are beta to everything else mem coins are degeneracy whatever but you know but it all relies on liquidity when conditions are tight Market goes risk off everything suffers money money supply goes down we get in trouble money supply goes up Good Times Rolling baby okay great so when you say it like that it sounds so obvious first let's look at macro liquidity and then let's take a look at crypto liquidity and then we'll bring it all back together and uh tell everybody what that means for uh the next the months ahead but first what's

the current state of macro liquidity well this is probably the most key thing right because as I said everything kind of operates in unison together crypto sometimes it will outperform sometimes will underperform but it's largely Our Fate is wedded to that of broader markets broader Market's not doing good we're not doing good broader Market's doing good we're doing good and so we have to then focus at least pay attention to have on our radar to some extent the big liquidity picture so if you look at the global liquidity Index this is super interesting because look at this chart then go back and look at how markets have largely played out right the global liquidity index when it bottoms out out markets tend to be usually nearing a more bottoming phase

it's not always perfect but it generally kind of has a strong rhyming factors so we can look back at 2022 great example now the FTX collapse was a bit of a Black Swan right we didn't necessarily know that was coming but it's interesting to see that black rock actually launched a private Bitcoin Fund in August of 2022 not a allot people know that not all people were paying attention at time but they were smart and why did they do that because they knew that liquidity was bottoming out they knew that we were getting ready for the next cycle in the market and they were giving their private clients a pathway into bitcoin price was $819,000 that we did go a little bit lower with the FTX collapse but they couldn't have foreseen that now you can see here on that chart that in 2022

liquidity bottomed out and then what started happening in early 2023 Markets started going up now China was the first one that started printing they brought us out of the global liquidity slump they their Central Bank started in injecting money into the market early 2023 we saw the Brits inject some money we saw the uh Japanese start injecting money and as we see now over the past year approximately more and more liquidity has been coming back into Global markets and we've been seeing that slow rise up and as you can see now we just were at a bottom recently and now we're gearing up for the next major liquidity cycle now it's nothing of course goes up in a straight line and it's going to be messy it's going to be

lots of drama along the way but you can see that we're looking right now at a major flow of money coming in that is the global liquidity index and there's another chart called the um the global M2 so this is really the the supply of you know liquid money in the market right and it's starting to Trend up very important chart here very important chart here that's shared by game of Trades that's been going around um social media here for a few days but essentially what you're seeing is that the money supply is not Contracting anymore it is now expanding and when the money supply expands the M2 money supply expands markets tend to follow higher okay you'll see zones of contraction and

we are actually in a negative territory for a while which hasn't been happening for a while but you see zones of contraction we see zones of expansion we're now have gone through a massive contraction as you can see the that was just this like Burge Khalifa like uh structure on the chart there and it absolutely collapsed down but now we're back in the positive territory we're just starting that's a very very interesting thing to note is that it's just starting if you're listening to this right now you have to understand that it's crazy as Markus has been as much gains have happened right Bitcoin is only now just it's just retesting this High I know we got up to 74k it's the new alltime high for Bitcoin but it's really only a few thousand dollars over the previous all-time high we're in that zone still of trying to retake the

previous highs really flip it in a serious way turn that all into support we're still very early in the cycle and the liquidity cycle is really just starting again it won't be straight up there'll be all kinds of drama along the way but the liquidity cycle is just starting and that that could run for a year that could run for two years indeterminate at this point but it is very interesting time to be paying attention to markets you mentioned what what impacts the liquidity Supply is it just governments printing money is that the main thing that is bringing more liquidity into on the macro level and and who's and who's doing that right now you mentioned a few how much are we seeing from these various countries I

think is it China that's really leading the way here right now China definitely let us out of the slump in 22 and China's been largely leading the way as they try to restart their economy from all the sort of the lockdown and stuff like that mean China of course Very famously had the most crazy lockdowns and it really affected their economy very seriously so they that's why they started printing late 22 and even just recently China announced another 60 billion uh giant printing spree right and they keep announcing these that's one of the biggest ones that they've done recently but they've done smaller ones since then Japan of course right now is facing an existential crisis with the Yen and they are forced to make some interesting moves so they've been having

to be forced to inject liquidity into the market European economies have been doing similar moves as well but the fed the FED has been secretly printing or injecting liquidity we can say in the market for a while and actually started with the bank collapses in 2023 you see when those Bank collapses happened they rolled out this sort of short-term lending program quote unquote to help the banks be able to access liquidity without having to sell their assets their massive losses So currently US banks are sitting on over half a trillion dollars of unrealized losses with their mortgage back Securities and their different bonds that they have and so when people come to ask for their money at the bank the banks were forced with with a choice of I well we we have to basically go and sell these mortg

back Securities for example at a big loss in order to give John back his money but then everyone else is screwed because hey we invested all your money in the stuff that was supposed to be safe which of course now we're learning problematics so the Fed was already backstopping with massive liquidity for that now to the tune of over half a trillion dollars that they've had um access from that lending facility but then it's getting worse because we're seeing more and more dysfunction in the bond markets and people are showing up a bit less to those Bond markets than have been previously and so now the FED has been buying about two billion dollars a week started two or three weeks ago they've been buying two2 billion dollar a week and they're going to be doing that for quite a while of bonds so you

know the money is out there and we're talking big sums of money and I know that for trillion dollar economies billion dollars here2 billion dollar $160 billion dollar there it all adds up because again we're at the start of liquidity cycle and it'll get crazier as we continue to go through it what if we move from sort of the macro situation over to crypto and what are we seeing that's impacting liquidity in crypto specifically well of course everything we just talked about matters right because it creates a risk on environment where money is starting to Splash around markets more broadly and some of that splashes into crypto but if we look at crypto we are in a wild situation right now because what I've talked about with the Bitcoin ETF is that this is a once in a market once in a market liquidity

event okay and that is something that's really hard for maybe people who haven't really paid attention to markets understand because you go back and look at the Gold ETF that was a once in a market for Commodities and gold specifically event that liquidity injection saw the price of gold go from 400 bucks to 2,000 bucks over seven eighty year period of course it took a while for all the money to flow in but that was back then when people didn't have Robin Hood app where they could go and AP 20 bucks in a Bitcoin in 10 seconds on their app times have changed and Bitcoin of course is a faster moving asset so we've seen huge flows of money already uh I think we're up to about 14 15 billion of net inflows into Bitcoin so far and of course when you start seeing liquidity hit the top but people

always ask me this well okay great but that's just for Bitcoin it's going to be a secular Bull Run for Bitcoin right only bitcoin's going to go up well no now we have a ethereum ETF coming soon SEC dragonus feed of course we have a salana ETF that's probably going to come maybe by the end of the year I don't know we'll see how soon that comes that of course it opens the floodgates to chain link ETF Avalanche ETF polka dot ETF whatever else right but the key point is that Bitcoin has always been the tip of the spear in terms of liquidity for the market and you need to understand that this is how the Cycles work Bitcoin runs up people who hold Bitcoin old whales all this kind of stuff they cash out and they want to then double triple quadruple their money so what do they do they

double down into altcoins and stuff like that and that liquidity flows right and so we're basically having trafi money coming in billions and billions of dollars and it's only starting it's only starting we're probably going to have 100 billion net inflows for Bitcoin by the end of the cycle maybe a little less maybe a little more but something like that and that's a crazy amount of money again once in a market liquidity event here that allows Wales to sell into that strength that allows people to not even sell but to take loans versus their Bitcoin and then take that money and speculate on altcoins and stuff like this so it it flows right down it flows right down now we of course talk a lot about the

American Bitcoin ETF obviously it's the biggest one but you know Brazil and Canada they've had Bitcoin ETFs for a while Europe's had a variety of different ETP which is basically ETF like products so that liquidity has been sloshing out there but nothing is as big as us markets except perhaps not as big but perhaps significantly impactful Chinese markets now I know that the Hong Kong Bitcoin ETFs have been out to bit of a slow start okay but that's because they haven't reached um they haven't been approved for stock connect yet stock connect is a program which allows for Hong Kong Stock Exchange assets to be traded in shenzen and in Shanghai stock markets which are Mainland Chinese stock markets there's been a lot of indication

that that is going to happen it's the only question when that happens and when that does happen that brings Chinese liquidity Chinese money into Bitcoin and ethereum specifically because those will be ETF products available on their markets you have Australia who got a bit Bitcoin ETF out Germany UK have recently approved ETP products for the markets so a lot of stuff's happening out there a lot of money is coming in at the top of the market for Bitcoin and ethereum okay and that then starts filtering down as always happens in Cycles this is just and people always say to me well this is like nothing's ever ever like this happened before there's always a catalyst there's always a spark there's always some kind of liquidity injection that happens in the market that allows markets to rise again this is what's happening this time it will be big and

it's here it's very exciting yeah it's a it's a amazing when you when you break it down like this and this is why we love having you on the show Lark you make it sound all so incredibly simple you said at the beginning you're a simple man and this is simple stuff but we all [ __ ] it up that's what it comes down to we're humans and we get greedy and we get fomo we [ __ ] it up okay uh so ETFs bringing a lot of liquidity into crypto we've already seen it with Bitcoin we're seeing it as you mentioned in newer markets coming and we're also seeing it with eth ETF coming this week next week sometime in the next two weeks it's definitely coming soon unsure exactly what it's in the US I'm saying uh what else is impacting liquidity within crypto that

you're looking at I think there's two interesting things that been going on recently and very again very crypto specific narratives but great for us as crypto investors and one of course is a historic level of on-ramps you know I've been covering news stories for the past year that had I covered any single one of those news stories back in 2017 when I was making videos be like oh my gosh this is the big thing wow new paradigm of money I can't believe this person or this institution so like was it last week or two weeks ago a big Brazilian bank one of the biggest banks in Brazil 60 million customers or something like that they're now offering Bitcoin to their customers what that's crazy man it's barely a blip most people don't even know what happened oh no another bank offering Bitcoin to their customers

who cares this is crazy we have historic levels of onramps for Bitcoin that have happened over the past two or three years uh Austrian post and Croatian post and all these weird little they're Banks right they're Banks as well these post offices in these European countries and so all these on-ramps have been opened up beyond the ETFs this is for people to buy real spot physical Bitcoin put it in their wallets right massive what's happening the the ability for people to access Bitcoin and again top of the spear right tip of the spear right top of the PID however we want to think about it money flows down from there it's absolutely crazy the Bitcoin ETFs are just one important part of the picture but they're just part of the picture and what you need to have a market go up you need to have that

liquidity because liquidity you need think about this liquidity is the rising tide that lifts all boats in the market and that's what we're getting we have more waves coming in than ever before and we can even look at stable coins as another great indication to this and stable coins have in a weird way become the killer app of uh crypto haven't they Beyond of course meme coin degeneracy obviously but we've had $ 30 billion dollar increase in meme coins this year meme coins are good business um people love them the amount of stable coin transfers that happen globally for payments and remittances and stuff like that are increasing all the time and it's quite interesting because I talk to people you know and you see these stories and stuff pop up stable coin payments are incredibly popular in a lot of places in the world it you may not be

using it if you're in the west listening to this but I'll tell you what there's a lot of people in the world who love stable coins and that increase of money in the market again is good more stable coins out there the more money it can a into your Your Meme coins your dog coins and whatever else yeah it's a we just did a big episode that came out yesterday really presenting the bull case for stable coins and the amount of as you said the amount of news that comes out on a weekly basis that is very unsexy news you know Meme coins sexy news everybody loves it everybody gets hype on big gains but some bank that's you know now offering crypto to their customers or you know another

partnership between a couple fintechs nobody really you know stripe just announced a massive partnership with coinbase which we talked all about on yesterday's show and it kind of goes unnoticed but these are the these are the rails for new Financial products like stable coins that are going to bring trillions and trillions of dollars on chain in a way that ironically was like really the first the reason that crypto was invented in the beginning was just to improve peer-to-peer payment and in in the middle of it all we've all gotten caught up on speculation of a dog with a hat or a cat or who knows what and we've kind of lost our way like come back to the boring stuff folks there's

good money to be made here well how can you ignore the bleeding edge of technology I mean come on they took a dog they put a hat on it genius genius okay so what's the downside though is is it all sunshine and Roses here there's always another side here lar what are we what are we missing of course of course so we're at a very exciting phase I believe in the market where we're in a start of a major liquidity cycle the downside is that liquidity cycle ends at some point you either sell and get out or you lose everything because when the liquidity cycle dries up I don't know how long it's going to last for but when the liquidity cycle dries up and it will dry up it always does everything goes down stocks go down everything else remember that whole conversation we had

about the beta the beta the beta everything goes down more Your Meme coins are going to go down minus 99.9 99 99% okay so you have to be ready for that you have to ready for that I like to always say that you need to take your profits or the market will take them for you and it's very very true okay you have to keep that in mind that great going up bad going down okay so keep that in mind and also keep in mind very crypto specifically we see how fast liquidity is moving we're not talking about like Bitcoin and salana and ethereum okay they're massive assets with huge liquidity all the time when you start going into the more speculative ends of the market you're mean coins for example liquidity can dry up overnight okay so you can be stuck real fast holding bags people so you need to

keep that in mind too when you get into a meme coin for example and you put in a 100 bucks and it goes 5,000 bucks can you even sell that for $5,000 a week later in a lot of cases you can't you got paper gains but you can't even cash them out so keep that in mind when we're playing these crazy games in the market that liquidity matters big time in crypto especially for your more speculative stuff where the may not even be enough liquidity to sell so keep that in mind too so what do what is your advice to you know anybody who's listening to this episode they're they're on board they're okay I I see liquidity going up how does that play into the way they should be allocating or positioning their portfolio to

succeed over the next as you said don't know what the timeline is here next 12 months roughly so I I think that the phase we've entered into the market right now is largely at this point in my opinion the the best buying opportunities obviously are behind us the second best buying opportunities kind of nowish and those are going to dry up pretty soon in my opinion now it might be days weeks or months but we will enter the next markup phase in the market before too long when that happens a lot of the prices you're seeing on stuff right now probably are not going to come back so the the question is you need to allocate yourself okay I'm pretty balls to thewall allocated currently uh so I haven't actually been buying a whole whole lot recently I bought some more ethereum the other day but nothing too

crazy but now the tricky part actually is just to hold through the liquidity cycle right to hold long enough to maximize gains as much as you can right you're not going to perfectly time the top so just get that idea out of your head right throw it away because it's not gonna happen to you there's be like one guy that perfectly sells the top on whatever asset you're probably not that guy but if you can get enough of the move perfect perfect right but now is the trick you got to hold through it and you can always add more positions on dips and stuff like that sure I'm not saying you can't right but the best period to have allocated yourself was the last about year we're going to be exiting this major period pretty soon in my opinion and then if the liquidity cycle

plays out as we expect that it may you just got to hold through it and be ready to take profits at some point later on so watch out for all those things from the central banks hey we're going to start big you quantitative tightening and stuff we're actually again we're at the start of a cycle so those new news stories will come in 12 18 months something like that and that's a further reason to listen in to the milk Road Show because Lark will be with us every Tuesday moving forward and he'll be making sure that we know when that liquidity cycle is going in the opposite direction Lark thanks so much for your time thanks for joining us today thanks for having me appreciate it in case you missed it here's what else you need to know in crypto news today it looks like

we can expect the eth ETF in the US the week of July July 8th Eric buunis the senior ETF Analyst at Bloomberg tweeted his updated prediction and he is now believes that the approval will be delayed till after the independence holiday this week making it likely that the ETF can be expected sometime the week of July 8th also pudy Penguins is building their own l2o on Friday Igloo Inc the parent company of pudgy Penguins announced they acquired frame and L2 focused on the Creator economy this acquisition aims to develop abstract chain a layer 2 Network for onchain culture and communities make sure you listen to the show later on this week

because we have Luca Nets from pudy coming on to share more finally Circle the issuer of usdc which is the second largest stable coin in the world with circulating supply of over 30 billion has announced that it's usdc and YC a Euro stable coin are now compliant with the eu's markets in crypto assets regulations this makes Circle the first major stable coin issuer to achieve this Milestone and means that Europeans can now access MAA compliant usdc and YC directly through Circle mint France talk about more liquidity coming into the space that's all for today folks thanks for listening in have a wicked awesome

day thank you for listening to milk Road radio the easiest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game then we'll leave a link to milk Road Pro as well your number one resource to help you invest successfully in crypto one final note this podcast is for educational purposes only and nothing we say is financial advice crypto is risky so you should never invest more than you're willing to lose thank you friends and we'll see you in the next one