World liquidity and the Digital Imperative

Perceived wisdom has been that as the world liquidity index (WLI) rises, Bitcoin (and crypto generally) rises with it.

At least since before 2023 this has been true, but during 2025, when the WLI stood at 110, things fell apart. Until then Bitcoin in particular had slavishly followed the indexes ups and downs. In November 2024, WLI stood at about 108 and Bitcoin just about $100,000. 4 months later the figures stood at 104.9 and around $76,000. Since then the figures rose again for the next few months with BTC on around $110,000 and WLI at 110. Since then, the SLI has continued to rise so that as of now it stands at some 116. Bitcoin, in contrast is only at around $90,000. If the correlation had held, it would likely be around $160,000.

So what has happened and why? The S&P and other stock market indices have all burgeoned as have may other indicators. Crypto is the poor relation in all this. Recent geo-political shifts have rather dented that particular narrative but so far it holds good.

The simple answer may well be that people have no wish to lumber themselves with more crypto, especially when there are other better yielding investments for now. That said, the surge to tokenisation of assets of all sorts is for sure dragging cash away from crypto. At the same time many macro indices are flashing confidence but experience suggests that that is precisely the time to be ultra cautious. In particular, what is let’s call real capital heading into?

I wrote some time ago about the incipient US commercial property disaster waiting to happen, but as ever the Americans are very good at heading off problems (sometimes). As of now, Jerome Powell (under attack as you probably know) has managed to massage things in such a way that the lower interest rates have fed through into some stability and refinancing at rates that enable the line to be held. As ever, the American economy is so flexible that what was an overwhelming and eye watering problem has been frittered down to merely being a bit of a problem – if that.

The sums of money now sloshing about the world looking for a haven – safe or otherwise – have become drivers in themselves and the amounts being spent on AI are so mind-boggling as to beggar belief. These sums are even more than those tied up in commercial real estate and that is kind of reinforcing the point I am making. The Americans stick to what President Reagan said about the cold war. “We’ll outspend them forever” – and they did.

In the digital world there are at the moment no areas absorbing money quite like AI, though one or two are starting to motor. I am involved with a project which in its scope is breathtaking. The idea is to digitalise everything on a farm. You might say that sounds weird and in some ways it is. But just think about this. One ton of carbon offset (very much not properly tracked at the moment but becoming more and more important to lots of industries) is worth about £30-40. Now digitalise each square meter of ground on a farm, record it all on an immutable blockchain and voila. That same ton of offset suddenly becomes worth around £350. I can feel your disbelief, but this is no joke. Properly identified farmland, with properly measured areas and what they will offset, is sellable at £350 per ton. That is a game changer. It also reinforces the fact that the most valuable thing we have within our grasp is data, especially verified and confirmed data.

At the same time there is already a system for identifying animals, and that is being expanded. It means that a cow, for example, can be tokenised digitally  and turned into cash if the farmer needs it. All handled by the wonder that is blockchain.

So my bet just now would be that crypto is to all intents and purposes at peak crypto and will only grow with the rest of the economy -if that. Crypto’s percentage of world assets has been gently falling for a bit, and that has resulted in some large managers gently NOT increasing their crypto holdings to keep their holdings balanced. Perfectly good investment strategy.

A much better one would have been to get into silver which has trebled in the last year, as against gold which has only managed around a 65% increase.

As ever in the real world, it’s the tweaks that make the money.

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