Whenever the indicator hits 5 or 6, conditions are extremely favorable for Bitcoin, #crypto and all risk assets. And when the indicator hits 3 or lower, long positions usually get rekt'ed

As a macro regime filter it does pretty well because for over a decade since CBs unleashed QE and their bag of tricks to save the monetary order, this correlation has held firm. The last signal was in Nov 2nd at $37500.

In terms of statistics, it has outperformed even Bitcoin long only strategy since 2013. The returns are better but importantly its Sharpe, Sortino ratios are much higher as well. The PnL is at new ATHs, while BTC is down 35%.

Of course, as always with crypto, we are cursed by a tiny sample size. So, what if we used a risk management overlay like some moving averages? Lets not get crazy and use optimized parameters ; instead I will use the common; 50 day & 100 day SMAs.

Interestingly, this doesnt add much value than just trading the liquidity signal. However, I would much prefer to always have a momentum filter as correlations can always break down in the future.

For now, the relationship btwn liquidity & BTC and all risk assets is pretty tight. And my expectation is that this will continue. This is the results for the unadulterated liquidity signal and the #SPX

#NIFTY