BGL - Bitcoin Global Liquidity Indicator [Da_Prof]

16 Nov 2024

This indicator takes global liquidity and shifts it forward by a set number of days. It can be used for any asset, but it is by default set for Bitcoin (BTC). The shift forward allows potential future prediction of BTC trends, especially uptrends. While not perfect, the current shift of 72 days seems to be best for the current cycle.

Sixteen currencies are used to calculate global liquidity.

23 Nov 2024

Nota Keluaran

I was asked to add more of a description here. The script source code is viewable, so hopefully you can see exactly how the indicator is calculated. For the Global Money Supply (i.e., what is called "Global Liquidity" for the indicator), the money supply from multiple "major" countries is adjusted against its FX to USD pair and added together. There are limitations on TradingView, so currently the money supply is made up of US, CN, JP, EU, KR, IN, CA, AU, TW, BR, CH, RU, MX, TH, ID, and SG. All are added and the entire amount is divided by 1e12.

Once the global money supply is found, we are interested in the change in money supply to see how liquidity is increasing or decreasing. The indicator is set to compare the current global money supply to the money supply a set number of days prior. This allows us to see how previous changes in money supply effect price movements in liquidity-sensitive assets. In testing, I found that liquidity calculated in this manner appears to front run the price of Bitcoin, likely since BTC is very sensitive to liquidity. The best period to predict BTC price movements currently is approximately 72 days, so that is the default. This period can be changed in the indicator settings. The change in global money supply over the period set is calculated as a percentage and plotted.

The BGL plots the change in liquidity N-number of days prior to today (default = 72 days). Since the BGL calculates the change in money supply from N-days ago, we can "plot the future". The change in liquidity can be plotted either N-number of days into the future or 500 data points (TV limitations), whichever is less. The future liquidity change is plotted as green for increasing liquidity and red for decreasing liquidity.

The original chart highlights significant increases in 72-day liquidity (dotted horizontal lines) starting from October 31, 2022 through November 18, 2024. Focus on the indicator and how each of these uptrends in liquidity are highlighted (i.e., between each dotted horizontal line is a significant uptrend in global money supply on the BGL). Now focus on the BTC price (in the yellow boxes) during these uptrend periods and how it increases during an uptrend in liquidity 72-days prior. This implies that an increase in liquidity has a 72-day lag on BTC price during this period. Please let me know if you are confused by the chart.

1 Jan

Nota Keluaran

Corrected for an error in the JPY data. JPYM3 is only off by a factor of 10x for the month of October 2024. If Tradingview corrects this, I'll have to change the indicator back later.

26 Feb

Nota Keluaran

The JPY data set was corrected. The indicator was reset to the original. Also grey was added to the color scheme for timeframes lower than the daily.