Thread by @Globalflows

The Credit Cycle and Macro Liquidity are NOT contracting, but Bitcoin can keep falling 🧵

Capital is setting the stage to move even further out the risk curve, but the current rotation is confusing people about the next leg higher in equities

We want to see people misinterpret liquidity because they will be the forced buyers in the next leg higher.

Here is the full breakdown 👇

First, just recognize that popular narratives around "Liquidity contracting" do not account for the sheer size of credit issuance into the underlying economy.

High yield issuance by big banks is running above last year:

And $KRE just made a new cycle high today

Are we really to believe that liquidity is contracting with the banks closest to the credit, are rallying like this?

Second, we continue to see capital moving out the risk curve in all of the highest equity sectors

Notice that the nonprofitable tech index and most shorted index continue to make a series of higher highs

These things dont happen when liquidity is contracting. They are always the first to fall when the regime flips bearish.

Now you might ask, why are some sectors lagging then? Doesnt this mean liquidity is contracting if the ARKK etf hasnt made new cycle highs ? This is where there is a fundamental misunderstanding in people's view of the equity risk curve. The names on the far end of the risk curve are always cycling through to new bets.

If youre betting on all of the names from last cycle, youre living in the past instead of seeing what names are changing the future.

I laid out the entire playbook for understanding this environment in the livestream and connected report yesterday. If you feel like you cant contextualize and pull together the moving parts correctly, this report does all of it for you

All of this brings us to Bitcoin and why it's down so much.

A lot of people are saying that liquidity has to be contracting because Bitcoin is down which is a bit of cognitive dissonance because other names on the far end of the risk curve are rallying, which is actually showing capital is moving out of the risk curve.

Notice KRE diverging from Bitcoin:

And this same divergence is taking place between Bitcoin and all of the lowest quality companies in the Russell

Perhaps, Bitcoin is the actual problem in this relationship instead of the entire market being wrong?

If Bitcoin is truly the "asset of truth" it is said to be, then it doesnt need anyone speaking for it. If Bitcoin is the source of truth in a world of monetary debasement, then Bitcoin will tell you everything you need to know in its price.

It doesn't need a spokesperson or prophet to speak on its behalf.

All of these factors for Bitcoin are coming to a culmination, and the question you need to ask is, WHAT is actually driving the flows right now if Bitcoin is diverging from every other risk asset?

This will be THE topic we cover in today's livestream which you can watch here on Twitter or with this link on YT:

If you want to follow all of the daily livestreams and macro research I am putting out on everything in global financial markets, you can sign up here:

capitalflowsresearch.com/subscribe