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Liquidity serves as the backbone for market transactions. It allows investors to quickly buy or sell assets, thereby making it a critical component in price determination. Historical data suggests that liquidity was instrumental in past market surges, such as the remarkable 20,000% rally from 2015 to 2017 and the massive 2,000% upsurge between 2019 and 2021. Conversely, significant price corrections, including the 80% drop in 2018 and the 70% fall in 2022, were similarly tied to liquidity contractions.
This isn't mere hindsight or speculation—it's a tangible factor that reflects investor behavior and market sentiment. Therefore, understanding how to analyze liquidity can provide a roadmap for navigating the tumultuous crypto landscape.
Decoding Global Money Supply