Bitcoin Analysis: Beyond the Block – June 2025
Disclosure
This article is intended solely as general commentary on global markets and does not constitute personal financial advice. The content presented is based on current information and opinions, and may change without notice. Readers should not rely on any information in this publication when making investment decisions but instead should seek professional advice tailored to their own circumstances. In addition, any recommendations or views expressed herein may conflict with the allocation strategy or holdings of the Ainslie Bitcoin & Bullion Fund.
Today the Ainslie Research team brings you the latest monthly update on Bitcoin – including the Macro fundamentals, market and on-chain technical metrics and all the other factors currently driving its adoption and price. This summary highlights some of the key charts that were discussed and analysed by our expert panel. We encourage you to watch the video of the presentation in full for the detailed explanations.
Bitcoin and Global Liquidity
Bitcoin is the most directly correlated asset to Global Liquidity. Trading Bitcoin can be thought of as trading the Global Liquidity Cycle, but with an adoption curve that leads to significantly higher highs and lows each cycle. As such we look to buy Bitcoin during the ‘Bust’ phase or liquidity low, then rotate out of it during the ‘Late Cycle’ where liquidity is over-extended and downside protection is required (our preference is to rotate into Gold). When correctly timing and structuring the rotation, it is possible to significantly outperform ongoing monetary debasement. The Bitcoin cycle low was in November 2022, and since then the returns have been unmatched by any other major asset.
Where are we currently in the Global Macro Cycle?
Welcome to the June edition of Beyond the Block. In April, we turned strongly bullish on Bitcoin, believing all negative news was priced in and a recession was unlikely. As of this writing, Bitcoin is trading at US$110,000, following a brief, shallow correction to US$100,300, which reinforced our bullish outlook. The sustained upward trajectory of Bitcoin and liquidity reaching all-time highs is encouraging, particularly given the limited central bank liquidity.
Our Global Macro Cycle Indicator remains in the ‘Early Cycle’ phase, characterised by slowing growth and declining inflation, driven by global trade tensions and economic uncertainty. We anticipate a transition to the ‘Mid Cycle’ later this year as policymakers seek to stimulate sluggish economies, particularly in the US ahead of the 2026 midterms.
As noted last month, several major economies are implementing fiscal stimulus to bolster growth. The European Union is pursuing a €150 billion loan package focused on defence spending. Germany is advancing a €500 billion borrowing plan for infrastructure investment. China is deploying a ¥10.9 trillion (~US$1.5 trillion) package targeting the property sector and consumer spending. Additionally, Japan has approved a ¥13.9 trillion (US$90 billion) stimulus package, including household subsidies and measures to counter US auto tariffs, with a broader economic impact of ¥39 trillion (US$250 billion) when including private-sector contributions.
US economic growth, tracked by ISM data, serves as a reliable indicator for forecasting economic trends. Last month, we identified “peak bearishness,” anticipating a rise in economic activity. The pause in the US-China trade war has brought stability and relief, boosting confidence. ISM data suggests the economy has likely bottomed, with a return to expansion expected within the next few months.
In May 2025, the US Purchasing Managers’ Indices (PMIs) for manufacturing and services showed mixed economic signals. The ISM Manufacturing PMI fell to 48.5 from 48.7 in April, below the expected 49.5, indicating continued contraction (below 50) in manufacturing activity. Despite the decline, new orders (47.6) and employment (46.8) indexes showed slight improvements, though prices paid remained elevated at 69.4. Conversely, the S&P Global Manufacturing PMI rose to 52.0 from 50.2, suggesting expansion. The ISM Services PMI dropped significantly to 49.9 from 51.6, missing forecasts of 52.0, signalling a contraction in the services sector for the first time in months.
The S&P Global Services PMI, however, improved to 52.3, reflecting growth. These conflicting readings highlight economic uncertainty, with manufacturing struggling and services showing resilience, potentially influencing Federal Reserve policy and investor sentiment.
Official inflation data is now aligning with our months-long forecasts. Our leading indicator has consistently predicted US inflation trends, even as others expected higher levels. Last month, we suggested our inflation indicator had likely bottomed and would begin rising. This month's data confirms that prediction, with figures starting to trend upward toward official levels. At this stage in the cycle, this is not a concern—higher liquidity, growth, and inflation are shifting our Macro Indicator into the 'Mid Cycle' phase, then eventually, toward the 'Late Cycle.' Inflation, in this environment, is a positive signal for risk assets.
Where are we currently in the Global Liquidity Cycle?
Holding financial assets is crucial for wealth preservation and growth, as demonstrated by the "Global Liquidity and World Wealth" chart. This chart shows that global liquidity (orange line) and world wealth (black line), have historically moved in tandem, with significant increases during periods of high liquidity (e.g., 2000-2008, 2020-2022). These trends indicate that owning assets like stocks, gold, real estate and of course Bitcoin, helps individuals and investors benefit from liquidity expansions, which drive value appreciation. Conversely, during liquidity contractions (e.g., 2008-2009), asset values decline, underscoring the importance of holding assets that can weather downturns.
The "Global Liquidity and Bitcoin Sensitivity" chart highlights Bitcoin's unique position. With a sensitivity historical multiplier of over 9 times to a 10% global liquidity shock (5 times in the 18 months). This means with a 5-time multiplier, for every 10% growth in liquidity, Bitcoin will generally appreciate around 50%, outperform traditional assets gold (2x), silver (3x), and equities (e.g., S&P 500 at 1x). This high sensitivity allows Bitcoin to capture outsized gains during liquidity expansions, making it an ideal asset when central banks and governments inject money into the economy. Its decentralised nature and limited supply further enhance its appeal as a hedge against inflation and currency devaluation. Thus, Bitcoin stands out as a powerful tool for maximising returns in a liquid financial environment.
Liquidity growth from central banks has remained modest, characterised by a pattern of intermittent and cautious injections. This "stop-and-start" approach highlights that central banks are not the sole providers of market liquidity. Currently, the only central bank with notable liquidity injections is the People's Bank of China (PBOC).
The PBOC is actively adding liquidity to markets in 2025 to support economic growth amid trade tensions and waning market confidence. Recent measures include injecting 1 trillion yuan (US$139 billion) via reverse repo operations and reducing the reserve requirement ratio (RRR) by 0.5 percentage points, releasing approximately 1 trillion yuan in long-term liquidity. The PBOC has also cut interest rates by 10 basis points and introduced a 500-billion-yuan swap facility for non-bank institutions to boost stock market funding. These steps aim to maintain ample liquidity, stabilise financial conditions, and encourage lending and investment.
Liquidity momentum has reached a new all-time high for this cycle, following a higher low earlier this year. Unlike the previous cycle's consistent upward trend, momentum has been less linear but still shows substantial room for growth, which we anticipate moving forward.
Both Bitcoin and global liquidity show an upward trend, with liquidity peaking around US$178 trillion and Bitcoin nearing US$105,000 USD in early June. Liquidity made a higher low earlier this year, aligning with Bitcoin's rise. However, the correlation is not 1:1, as Bitcoin exhibits sharper fluctuations while liquidity moves more steadily. In the short term, Bitcoin's correlation to liquidity remains strong but imperfect.
Trump vs Musk
Given the recent rift between Trump and Elon, we’ve compiled some data and charts to connect the dots. Firstly, entitlements aren’t facing significant cuts. Even minor trims, as DOGE has attempted, have sparked a political firestorm and will have little impact on the fiscal deficit. Keep in mind that one person’s spending is another’s income—stop the flow, and the economy stalls.
Revenue from tariffs is expected to reach US$255 billion for fiscal year 2025, an increase of US$165 billion. DOGE claims to have saved US$180 billion which we can assume is the upper limit. US$345 billion sounds like a lot, except the predicted deficit for fiscal year 2025 is 1.9 trillion, up from US$1.8 trillion in 2024. The current deficit as of April was US$1.1 trillion, which suggests the deficit will be higher than CBO expectations.
As evident, deficits typically surge during recessions, yet we’re witnessing them rise again despite solid employment levels. We contend we’re now in a phase of perpetual recession-style spending, regardless of leadership. The CBO estimates that the "One Big Beautiful Bill Act" (H.R. 1), passed by the House on May 22, 2025, would boost the federal deficit by US$2.4 trillion from 2025–2034, excluding macroeconomic effects and debt-service costs. Including debt-service costs, the total deficit increase reaches US$3.0 trillion over the same span.
"The Stock Market IS the Economy," highlights wealth ownership by the top 10% of the population. It shows that the top 10% own 87.2% of stocks, surpassing their 67.3% share of total wealth, 84.4% of private businesses, and 43.9% of real estate. This data, sourced from Ritholtz Wealth Management and the Federal Reserve, underscores the concentration of stock ownership among the wealthiest. The disparity suggests that stock market performance heavily influences the top 10%'s wealth, reinforcing the notion that the stock market is a key economic driver, particularly for this affluent segment.
The top 10% of earners now account for nearly half of all US consumer spending, a marked shift from previous decades. This concentration indicates that consumer spending heavily relies on this wealthy segment, making it susceptible to their financial behaviour. A slowdown in their spending—triggered by market downturns, policy changes, or economic uncertainty—could reduce overall consumption, negatively impacting GDP. The chart on the right illustrates federal revenue trends, with individual income taxes (~US$2 trillion) and Social Security/Medicare taxes rising post-2020. A spending slowdown would decrease taxable income, reducing revenue and widening the federal deficit, particularly if the top 10%’s contribution weakens. The chart highlights increased revenues following the COVID-19 stimulus, but revenues declined with the stock market after monetary policy tightening in response to high inflation.
Structural upward pressure on US Treasury yields stems from increasing deficit spending and heightened inflation expectations. However, yields tend to rise more dramatically when stocks decline, as the market is closely tied to government revenue and consumer spending.
Conclusion
The US fiscal and economic dynamics outlined - rising deficits, concentrated wealth, and reliance on the top 10% for consumer spending - drive an increasing need for liquidity to sustain economic stability. The projected US$1.9 trillion deficit for 2025, up from US$1.8 trillion, alongside the US$3 trillion deficit increase from the “One Big Beautiful Bill Act” (H.R. 1) through 2034, reflects persistent government borrowing. This deficit spending injects liquidity into the economy, as government outlays become income for households and businesses.
The top 10%, owning 87.2% of stocks and driving nearly half of consumer spending, tie economic growth to stock market performance. Market downturns could curb their spending, reducing GDP and tax revenue, which, given the US$2 trillion reliance on individual income taxes, exacerbates deficits. To offset this, policymakers increase liquidity through monetary easing or further fiscal stimulus, as seen in post-COVID revenue spikes.
Perpetual recession-style spending, despite solid employment, signals structural dependence on liquidity to maintain growth. As deficits grow and the top 10%’s influence amplifies, the economy requires ever-expanding liquidity to prevent stalls, aligning with global trends of fiscal stimulus (e.g., China’s ¥10.9 trillion package, Japan’s ¥13.9 trillion plan) to counter economic slowdowns.
Watch the full presentation with detailed explanations and discussion on our YouTube Channel here:
Until we return with more analysis next month, keep stacking those sats!
Joseph Brombal
Research and Analysis Manager
The Ainslie Group