If you’ve ever wondered what really drives bitcoin’s price, there’s a formula for it, and it’s more accurate than most people realize. Now, this isn’t a guess. It’s a framework built on data, global liquidity, leverage, and investor behavior. The same three forces that have quietly driven every bitcoin boom and bust cycle. Now, once you understand this, you’re going to stop reacting to price and start positioning ahead of it. Because right now, the. The signals say we’re entering a new regime real quick. I’m Mark Moss. Since 2016, I’ve helped millions navigate bitcoin cycles using data not hype. I’m a partner at a leading bitcoin venture fund.

I advise companies building the future of finance on Bitcoin. And in this video, I’m going to walk you through the same systems and the same signals that we use to make decisions and how you can use them, too. So let’s go. All right, so we’re going to dig into the data here. Now, in my companies, with my team, I tell them always, look, we’re not in the guessing game. We’re in the data game. All right? Now, same with bitcoin. People ask me all the time, should I buy now? Is there another dip coming? I don’t know.

I’m not in the guessing game. Let’s look at the data and see what it says. Now, what most people get wrong is they think there’s this illusion of chaos. Like either one, they look backwards at the chart and go, wow, Bitcoin looks very predictable. I should just sell here and buy back here. So simple, right? Or they think there’s no way to know what’s going on. But what if it’s something in the middle? Now, I have this chart up right here, by the way, I’m going to be using a lot of charts from Bitcoin Magazine Pro.

I’ll be using a lot from Jamie Coutts at Real Vision. I’m going to be using a lot from a lot of different places to show you that there’s a lot of places to get this data. I’ll cover that with you. Okay. But we can look at the history of Bitcoin since 2011. And you can see we have a high right here. And then it goes all the way down low. And then it comes high and goes low again. Goes high and comes down low. Now, of course, it always trends up. So if you just bought here and waited 10 years, nobody can wait 10 years.

So they’re trying to buy here, sell Here, buy here, sell here, etc. Right. So it looks very chaotic. So what some people do is they think, well, what about if we use on chain data? So we’re going to go through this. So there’s some on chain indicators we can look at to help us understand the way bitcoin moves. We look at technical analysis. A lot of people think technical analysis is the way to go. And so, you know, know. Well, we have to look at the five repeating patterns and after repeats, then it consolidates here. Right.

So there’s like, I call it reading the tea leaves. They think they can do that. However, for most people, this is like technical analysis. More like this. Yeah, you can’t make sense of that. Right. So maybe it’s on chain indicators, maybe it’s technical analysis, maybe it’s macro trends. Okay? All of those are important. We want to be looking at all of those. Of course, I talk about macro topics all the time. But, but what if the boom, the bitcoin boom always begins with three different data points. And if we understand these three data points and how to look at them, then we can figure out how to navigate the bitcoin cycles.

Okay, well, do you want to know what those are? Let’s break them down. Now, I call this the hidden engine. Now, the hidden engine is what I’m calling a formula, a formula of how to understand this. All right, now I’m just going to say real quick, disclaimer again, nobody knows the tops or the bottoms until you’re looking backwards. What we can figure out is when things get overbought or oversold. We do know when they’re expensive or when they’re cheap. And that’s what we’re going to look at here. Okay, so the first thing is that the old sort of driven model of sort of Bitcoin’s forecast, its future was either network effects from Metcalfe’s law.

So Metcalfe’s law says that as each node, as we continue to add nodes, we multiply the power of the network. So like, one phone is not very valuable if no one else in the world has a phone. But if everyone has a phone, the phone is more valuable. Reed’s law is very similar, except for now it’s not just the nodes, but it’s then the multiplication of those nodes down below. So it’s more exponential. But that’s sort of the old model. The new models we have are a little bit different. So we’re going to break it down into three fuel.

This is the global liquidity. And there’s two ways we have to look at this. GLI and grs. Okay, I’m going to break those down. And this has about moves. About 75% of Bitcoin’s moves are driven by these two things. Now that’s the fuel. Then we have the pedals, the gas and the brake. And that’s really the leverage that goes into the system. And then we have the valves, the blow off valves, the release valves. And this is the profitability behavior. And we can look at this through on chain data. All right, we’re going to break all this down, but buckle up, turn off all your distractions, get a notepad, write this down, let’s go.

Alright, so the first thing is the fuel. This is what feeds the engine. Alright, we’re talking about GLI and gls. Now a lot of people get this wrong, so let me break it down for you. GLI stands for global liquidity. Global liquidity. Now where a lot of people get this wrong is they look at USM2, but we’re talking about global. Bitcoin is a commodity, it’s a global asset. And we want to look at the global liquidity. Now I believe the absolute master in this game is Michael Howell. I reference his work all the time. He writes a newsletter called Capital Wars.

It’s a paid subscription. I’m going to be referencing a lot of stuff from paid subscriptions that I have because I pay for data. You might want to pay for data as well, Capital Wars, Michael Howell. Or you can just continue to subscribe to my channel and I’ll break it down for you. But he talks about the impact of global liquidity. He says the biggest and most direct impact comes from global liquidity. Seems like we should be paying attention to it, let me tell you why. Alright, so we don’t want money, we want goods and services. Goods and services is wealth.

So when the government prints more money, sends it out, a STEMI that doesn’t make more wealth, they can’t print wealth. So what we really have is all the money of the world divided by all the goods and services of the world. As they print more money, the value or the price of those goods and services go up. So if we look at liquidity as they increase it, then we know that it has to go somewhere and it’s going to go into these assets, they’re going to go up. That’s why it’s the driver. Okay? This is the leading indicator, not a lagging indicator.

Okay? So he says it’s the most important thing. Global liquidity he says that Bitcoin is not a substitute for global equity. Not a substitute, but rather it’s a barometer. So it’s a way to read it, a way to gauge it. Right? Way to tell us what’s going on. What, what’s more is it is a truly global asset. Again, Bitcoin is a global asset. So we can see what’s going on with India and China and Japan, not just the United States. Whether China prints money or the US Fed injects liquidity, either way the price of Bitcoin should rise.

It’s the most sensitive asset to global liquidity. Alright. It’s like a sponge, it soaks it up A little bit more from Michael Howell. Again the king of global liquidity. In my mind in this article is a two piece series. He was writing Bitcoin and Global Liquidity. He says that debt, debt denominate. So we’re talking about global equity. A lot of people want to know like what is it? And where you go wrong is just looking at M2. It’s a very rough way to look at it. But because we’re in a debt based monetary system, all money is created through debt issuance, debt creation.

So we want to be looking at debt. Okay, so we want to look at the money. Yes. We want to look at the availability of credit, the availability, the ability for central banks to create more money. Okay, so it’s that debt dominates. So what he’s saying here is that currently in our system, in this debt based monetary system, debt never gets paid, it never gets extinguished. Instead refinancing existing debt, so we always refinance it, we kick the can down the road. Refinancing existing debt with about 75% of transactions now involving debt rollovers. This creates a dependency on collateral.

This is why we can have no deflation when debt is issued. So money is created through debt issuance. The debt is the asset, the dollars are the liability, the debt is the asset. So the debt becomes the asset or collateral for more debt. That’s what he’s saying right here. So we have to roll the debt over. We can’t pay the debt off because it’s collateral for more debt. So it has to get rolled over. It creates a dependency on collateral. We can’t have a deflation. It says that is global liquidity. The financial system is trapped in a debt refinancing loop.

So we’re trapped, we have to continue to roll it over, to roll it over. We have to create more of it. We’re trapped in this System. There’s two ways out. We continue forward inflating the system in a debt based monetary system or we let the whole thing collapse and crash and we start over. Now there’s no politician in the world or banker or elite or whoever that may have any control or say is going to allow this system to crash and see what happens next. It’s always going to be continued. That’s why we’re trapped in the system.

Policymakers need to continually expand liquidity, right? So all those doomers out there that are calling for this market crash, they don’t understand the basics of the system that we’re in. Okay, let’s go a little bit deeper. Now Michael Howell uses these charts. I use them all the time. So you probably recognize these. This is the global liquidity going back to 2021. So it went up and then we had this big crash here in 2022. October 2020 was when we were in like that bear market. Everybody saying the world’s going to end, the markets are all crashing down.

I started making videos saying there’s no market crash coming, here’s why. And it was because of this liquidity cycle starting now. You can see here is just since this year. And we’ve had a big run up in global liquidity this year as well. Again, these charts are from Michael Howe. Okay, now here’s another chart on global liquidity. I mean you can just go Google searches and find any number of charts. I like this one here because it kind of shows us a couple different levels here. So in the green right here is the global M2 growth.

The blue line is the global M2 supply, the money supply. And then we’re overlaying it with the orange or the red line which is the bitcoin price. And so what the green is, is the year over year change. So you can see we had this massive print of global liquidity during the pandemic, right? 2020, 2021. And so this pushed the price of these assets sky high. Global liquidity went up, the bitcoin price went up because of this massive volume here. Then we had this big drawdown both in global liquidity and in the bitcoin price coming down as the year over year, month over month changed and liquidity drained out.

And you can see here it’s starting to pick back up. And of course both of them are turning back up. So you can start to see the correlation of this. I’ve done a bunch of videos on this and you have to understand it’s also important to realize it has somewhere between like an 8 to 12 week lag. Most people just consider it 3 months or 90 days. Okay, so that’s the global liquidity. Here’s the chart on Trading View. Again, I just want to show you you can get these char charts from anywhere. I like to pay for my information.

It’s a much faster, easier way to get it. But this is just Trading View. This is my charting software. And you can see the Bitcoin price and global liquidity and you can see how closely tied they are together. So these are the leading indicators, okay, Global liquidity. Now the next thing we have to understand, remember the fuel is the global risk score and we call that grs. Now this is where we start to get into some of the predictive risk scores, power of what these things tell us. Because again, we’re looking for leading data not lagging.

Tell us what already happened. We want leading data to tell us what’s going to happen. Okay, now these charts are from Jamie Kouts over at Real Vision. He’s an absolute master in these. And this is the global liquidity index, gli and he’s talking about the grs, the global risk score. So the global risk score attracts how far Bitcoin’s price deviates from its liquidity. So if the liquidity is driving it up, the risk is when it starts to deviate away from liquidity. That’s what this tracks. It’s implied fair value based on a regression model. Regression from the liquidity.

It says here it shifts GLI global liquidity from being just a macro backdrop to an actively usable risk management tool. So for risk management, see, most amateur investors just think about how much money can I make, Tell me the hot crypto to buy, right? And they just want to buy it yolo and hopefully, you know, cross their fingers they make money. But professional investors always want to think about the risk. That’s the name hedge funds like Hedge hedging the positions, it’s always about risk. And so we want to use this as a risk management tool. Even when I’m going long to make money, I need to know how big I should bet, how long I should go based off of the risk of that cycle.

And that’s exactly what this is going to break down for us. Let me show you what we’re talking about. Okay, now the first thing we have to understand is that liquidity, liquidity, like most things, it moves in cycles. I talk about cycles all the time. Okay, so what we can see in this case we’re calling them regimes, is we can see that this liquidity moves up and then it consolidates in a pattern. Why? I’ve done a bunch of videos on this, but it’s because the debt has to get rolled over. It’s about an average of four year cycles of debt.

On year three, we start running out of liquidity until the next tranche just put in. Then we’re off to the races for the next four years. So we have this upcycle liquidity, we have a consolidation pattern. And here is the breakout. Okay, this breakout puts us into the next super bowl cycle. And now we take off, we go into a consolidation right here and then we break out consolidation right here. And the reason why I’m showing you this is because we’re sitting right here, right now on the third breakout. Now, if you’re an elementary kid looking at patterns, we have a consolidation breakout.

Consolidation breakout. Here we’ve had a consolidation and we’re breaking out. What do you think happens next? Well, if you see this arrow shooting up, you would be exactly right. But again, we want to understand one, we’re in this breakout of this regime shift, but we want to look at the at the risk. Okay, so how does this work? Again, this is from Jamie Couch. This is a global liquidity risk score. And Basically we have five levels. Level 1, Level 2, Level 3, Level 4 and Level 5. You can see that. And this is overlaid with the price of bitcoin going back here to 2017.

And of course, this is current right here. So what this shows us right now is that we are currently at level three, which is basically neutral. Basically neutral, right. We’re not at the bitcoin lows right here where we were back here when we were only at one. We’ve come up a lot in the bitcoin price, but we’re only at level three, a neutral score. We’re not at five yet. What does that tell us? Well, it tells us we’re sort of like at a medium risk. We’re not the lowest risk ever, but we’re nowhere near the top either.

So what this tells us is potentially bitcoin has a lot of room to go up from this hundred thousand dollar price point that we’re in before we start getting into level four, Level five risk. Now, even when we get into level five, we can keep going for a long time. These do not predict absolute tops. They only let us know when things are cheap, level one or expensive. Level five, that’s it. So you can see here we hit level five, but look how long it continued onto that pattern, right? So this is one thing, but again, in this risk score, we’re only at level three.

Okay. There’s a lot more to go over, so let’s keep going. All right, now, we talked about the fuel for the engine. Now we want to talk about the accelerator and the brake pedals. So now the fuel’s in, the car’s going. How do we control this? How do we speed it up or how do we slow it down? Okay, this is the leverage or the drs. Okay, this is the derivative market. This is all the bets, all the side bets that are happening on Bitcoin. So in the old days, we just looked at Bitcoin, looked at the network effects, looked at the on chain data, the number of addresses growing, the number of wallets holding one or more Bitcoin, things like that.

But now we have derivatives. Now derivatives are, again, where I can bet on the side of where the price is going. Leverage bets, leverage longs, leverage shorts, all those things. The derivatives make up three to five times the total volume of Bitcoin. So just looking at on chain data alone today doesn’t really give us the total picture. It’s great. We should definitely be holding Bitcoin on chain in your cold storage. But if you really want to understand price action, we have to go back, look at the derivative market. Now, what we can see is that In March of 2024, the derivative market was about 75% of the Bitcoin price action.

Now, again, this goes back to about 2020, and it comes to current. And what this shows us is these derivatives bets going higher, and then the red is going lower, going higher, going lower. And of course, as the derivative action is going higher, what happens to the price action goes up? When the derivative market is coming down, then, of course, we have down action. We had this long consolidation period when there wasn’t a whole lot of derivative action going on. Here we have the increased derivative action. You can see we’re heading back up as we want to be looking at this, because, again, most of the price action is happening there.

It’s what’s creating a lot of rallies and crashes. Why? Well, very simply, markets stop going up when there’s no more buyers. They stopped going down. There was no more sellers. And what happens with the derivative traders? They’re adding all this leverage onto the system. So in a bull market, they’re piling on, piling on, piling on, which pushes it up even faster than it normally would. But also when it’s going down, not only are people exiting but they’re also starting to pile on the shorts, which pushes it down even further. So it creates a lot more volatility.

But basically, the drs, this score, it quantifies the excess that we have in the system. Again, this chart’s from Jamie Kautz over at Real Vision. And this is giving us the same type of A score again. Level 1, level 2, level 3, level 4, level 5. So where are we in the derivative risk score? Well, let’s take a look. What we can see is right now we’re sitting at about a 2, not a 1, not the lowest, certainly nowhere near a 5. We’re only at a level 2. So what this means is that the bitcoin price can run way further up before we start getting into a risky situation.

Not predicting the top, but getting close to that. And as you can see at a level two, we have a long way for the bitcoin price to run up from this risk adjusted model. All right, that’s two. We can keep going. Now we have the valves. What are the blow offs? How does the market move when we have these other things? Well, this is the network profitability. So this is gauging how many people on the bitcoin network are in profit or at a loss. Because depending on where they’re at with profitability, we can start to guess and gauge what they might do next.

It drives their decision making. If I’m sitting in a massive profit, I might want to, you know, scoop a little cream off the top, right? I might want to sell a little bit. If I’m sitting in a major loss, I might try to hold until I get back into profitability. And so what this does is we can look at this and here’s a couple on chain indicators here. So these are ones from Bitcoin magazine. I recently did a video where I talked about the five on chain indicators that I like to watch the most. We’ll link to that in the show description down below if you want to go watch that video.

But this is the MV RV score. You’ve probably heard about this. It’s the market value versus the realized value. And so what you can see here is the black line is the price of bitcoin and this gold line here is the Z score. So what you can see is when it shoots really high, that was a bitcoin top shot really high. That was a bitcoin top shot, really high. That was a bitcoin top. But as you can see, we’re nowhere near shooting all time high. We’re way down Here. So we need to see this go way up to here and this will go way up to here before that happens.

So again, the indicators are telling us we’re nowhere near that level. Here’s another on chain indicator that we can look at. This is the net unrealized profit and loss. So again, this is showing how much profit people are sitting on. Unrealized, right. And again, when this gets higher, low, it starts to show. So this got high here at this, at this top. This got really high at this top. But here we are way down here. So this price needs to come up and this needs to come back up somewhere right around there. Hey, don’t worry. I’m going to show you some predictions of price if you stick around with me.

Okay. Another one we want to take a look at is the sporadic. Now the SP is basically the spent output profit ratio. And again, when we see high volume, this sort of marks the top of cycles. But again, look how low that volume is right now. Again, these don’t predict where we’re going, but they help us to understand when things are expensive or cheap. Now the NPRS is basically taking all of these signals and putting them together in a single source to make it much easier. And again, this is from my friend Jamie Couch over at Real Vision.

They do amazing work. And so what we can see here is the network profitability risk score. And again, sort of same framework, we have level one, level two, level three, level four and level five, Five being the most risky, one being the least. Where are we today on this risk score? Well, right now we’re sitting right around about a 2.5, 2.7% risk. So just below neutral. A little bit less risky than neutral, which again means this needs to run way higher in order for this to run way higher. And so again, we’re well below. We’re not at the lowest price levels ever.

Obviously we’ve come off this bottom all the way up. We’re obviously not here anymore, but we’re nowhere near the top. Based off of these things, it looks like this market has a long way to go. You can think of this as like an emotional heartbeat because again, like if I’m sitting on a lot of profit, I’m probably going to take some profits. Maybe I’ll pay off my house or buy something new. Right. Or if I’m in, if I’m at a loss, I want to hold it. So it plays with my emotions and so it sort of gives us that leading indicator of what the market may do.

Okay, so the question is if we combine all these, where are we now? I’ve kind of already given that away. If we add the GRS, the DRS and the NPRs together, where are we? But what I haven’t given away is based off historical returns, where do we go from here? If we look at past market cycles that we’ve seen this, what could potentially happen from here on out? Let’s take a look. Alright, so if we go back and we put all these together again and combine them, what we can see is we’re right here in about 2.6, 2.7.

So that means we need to go a lot higher here for this to come up a lot higher here. We’re already up quite a bit off the bottom, doesn’t mean we’re at the top. You have to understand market cycles. Right, so we’re above, right? We’re at new all time highs, but at the midpoint of the cycle, not at the top of the cycle like we were last time we were there. So based off of the combined score, we can see we’re in about a neutral market. Again, we’re not anywhere near caution. We’re not a four, we’re not a five.

And that sort of tells us that we have a long way to go. Now, based off of past performance, which again is no guarantee of future performance. But based off of past performance, when we’ve seen these levels before, what has bitcoin done? Now if we look at each of these indicators on its own, they all have different data, but if we combine the three, we get something different. Okay, so network profitability, risk score, NPRs performance, and basically right now we’re sort of in this neutral range. We’re a little bit lower than neutral, but let’s just call it neutral for this exercise.

Okay, so what this says about almost 60% of the time this has worked. In 30 days we’ll see 11%, 90 days, a 45%, 180 days, a 96% return double. Okay, it’s not guaranteed 60%, so that means it’s a base case. So what we want to do is we’re always looking at the odds. Again, poor mentality thinks about how much money can I make in the YOLO in. But smart money always makes structured strategic bets. How much should I allocate? Well, depends on what my odds are. If I have a 90% chance of winning the bet, I’m going to bet more.

If I have a 10% chance, 10% odds of winning the bet, I’m going to bet a very little bit. Obviously Right. So we want to understand the odds, what the probabilities are. And based off of where we’re at right now, we have a long way to go. All right, we have a long way to go. Now, understanding this gives us new tools. But how do we use all this? How do we use all this again? So the first thing is, this is not a crystal ball. This doesn’t predict the future. This doesn’t tell us exactly what bitcoin’s price is going to be, on what date and when it’s going to turn around.

It doesn’t tell us if there’s another big dip coming, that you should wait to buy the dip. What it does tell us is if it’s expensive or if it’s cheap. It does tell us if we’re starting to get overbought or oversold. It does tell us maybe when we should be pressing in harder because the odds are with us, or we might want to pull back a little bit because the odds are against us. Now, I would strongly advise against trying to time this and sell out and buy back in, because what happens, let’s take 2017, for example.

In 2017, Bitcoin ran from 1000 to 20,000 in one year. Okay, from 1000 to 20,000, 20 times. It’s pretty amazing. But if you were looking at these indicators around, I don’t know, it was around 4 to 5,000, it started flashing that it was the top of the market, it was overbought, it had gone up four or five times. It’s amazing. If you’re a traditional investor, this is the best returns you’ve ever seen in your life. And so the indicators were showing it was very expensive. And so if you’re following that and trying to time the market, you would have sold out, you would have cashed in and you would have missed the run from four or five grand up to 20 grand.

Now, what happened is, of course, it crashed all the way back down and you were going to try to time the bottom, but of course, nobody wants to catch a falling knife. So you’re waiting for something to turn, some sentiment to turn the charts to turn, to tell you when to start buying. But bitcoin moves so violently that really quickly it moved higher and now you’re buying back in at 6 or 7k. So if you tried to sell out at 4 or 5, you missed this, and then you bought in at 6 or 7, you actually got behind.

Now, if you’re like, you know, whatever your circumstances, maybe you’re older, you’re on a fixed Income, you don’t have a long time frame. Hey, maybe, maybe the four or five times on your money was amazing. It was the best return you’ve ever had. And congratulations. And if you’re just trying to get more US dollars, you can trade it from 1 to 4, you can trade it from 6 to 20 again and you can make that spread and that’s cool. But if you’re a long term bitcoin Hodler like I am and you expect it to hit $1 million by 2030 like I do, then I’m not trying to time this.

What I’m going to do is I’m going to start adding aggressively here. So when it gets here, I’m not adding as aggressively. So I’m buying super heavy right here, around here, I start slowing down. Maybe I’m not going to put any in. Maybe I’ll just kind of wait. I’m not selling, but I wait. Then when it starts coming down right around here, I start deploying again. I’m going to buy all the way through this dip. When it gets here, I start waiting again. That’s how I use this. Now we also, that’s positioning versus chasing. Not trying to predict, I’m not trying to time, I’m positioning myself correctly to take full advantage of this cycle.

Again, we want to use tiered entries. So again I’m not going to exit, but I’m not going to do massive entries at the top of the market. I’m going to pause these entries here. We’re nowhere near that yet. Then I’ll start tiering in my entries over here. We do this based off of conviction weighted allocations, remember the percentages. So based off of where we’re at, as we’re starting to get more expensive here, as the odds, the percentages are coming down, it’s less. So it’s conviction weighted allocations. Another thing I’m not talking about in this video is the treasury stacking.

So now there’s this new breed of treasury companies, Bitcoin treasury companies, Microstrategy launched it, Meta, Planet, Matador, all these other ones that are blowing up. And you might want to consider stacking into some of these as well. If you want me to break down a whole video on that, let me know down in the comments. Okay, so I do want to just press on something here. This is not static, okay? These charts, they change. This is dynamic, it’s moving. So if you’re looking at any type of indicator, a 200 moving day average, for example, it’s moving with the price so you can’t go off of what we just said.

That’s why we can’t predict the top or we can’t predict the time because these are moving. So what we’re doing is we’re seeing the signs as it develops. Now, the cycles are not random. They happen in proper sequence, but not to the exact time or date. But it’s always going to be the same thing. It’s always going to be liquidity, that’s the leading indicator. It’s always going to be leverage built up in the system. That’s the derivatives. And it’s always going to be the human emotion because we drive. Humans were driven by pleasure, greed and fear, pain.

That’s it. So we want to look at those three things and again, not trying to predict the top or the bottom, but instead measuring the risk and the location of our investments through the cycle. If you follow this, you’re going to have massive success. And if you want to know the top five on chain indicators that I’m watching to help me understand this, watch this video right here and I’ll see you over there.
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