#1191 Darius Dale On Global Liquidity & Bitcoin Halving

— Global liquidity is the primary driver of asset prices over the past 2–3 years; it peaked in late January–early February 2023 and has since reversed negatively, with central bank balance sheets and narrow money supply both contracting.

— Bitcoin's price rally since March 2023 appears driven by store-of-value demand following the regional banking crisis, rather than by improving risk appetite or liquidity fundamentals.

— Historical data shows significant volatility (20–50% drawdowns) in the year leading up to Bitcoin halvings; the April–May 2024 halving will likely coincide with a potential phase-two credit cycle downturn in late Q3–Q4 2023.

— Institutional investors are divided: hedge funds are trading with record short-termism and high frequency, while long-only managers are heavily positioned for dollar weakness and global growth—both strategies Dale views as vulnerable to medium-term reversal.

— The Federal Reserve and Congress matter far more to asset markets than the president; executive orders now drive policy due to congressional gridlock, but the Fed controls the liquidity cycle that determines market outcomes.

— A U.S. recession is likely in Q4 2023 or early 2024, bringing potential equity crashes and credit spread blowouts; Dale recommends patience and prudence to buy at better levels rather than chasing current prices.

— Bitcoin was up ~70% in Q1 2023, outperforming most assets, but recent gains reflect deposit flight to digital assets (post-SVB panic) rather than liquidity or risk-appetite improvement.

— Global central bank balance sheets peaked at ~$30 trillion in late January–early February and have contracted since; domestic U.S. narrow money supply is down ~6% year-over-year, one of the sharpest contractions on record.

— Global narrow money supply is marginally negative at −0.3% year-over-year; the ECB balance sheet remains in meaningful contraction while the PBOC and BOJ provided temporary support.

— S&P 500 has been range-bound between 3,800 and 4,300 for roughly one year (as of May 2023), with high intra-annual volatility (10–20% swings monthly) creating tactical trading opportunities but masking medium-term risks.

— The one-month T-bill minus three-month T-bill spread shows record inversion, signaling stress in the repo and collateral systems.

— Dollar strength and "short the dollar" positioning will likely reverse by late Q3 2023; investors crowded into emerging markets, commodities, and global growth bets should prepare for a transition to risk-off environments.

— A better buying opportunity for Bitcoin and equities is likely 2–3 quarters ahead (late 2023 to early 2024); avoid the temptation to chase current prices; historical halving patterns suggest significant drawdowns are normal and represent entry points, not exit signals.

— Hedge funds trading with extreme short-termism and high frequency are blind to medium-term credit cycle risks that will crystallize in Q3–Q4; focus on medium-term macro resilience over daily volatility and be positioned defensively before the market consensus shifts.