Bitcoin Is The 'Last Functioning Smoke Alarm Of Liquidity,' Says Macro Analyst Luke Gromen

• Gromen said he sold most of his Bitcoin and has only "nibbled" back in, selling "closer to the top than what could be the bottom."
• Blaming poor market breadth and a liquidity drain led by AI stocks and oil, he called Bitcoin “the last functioning smoke alarm of liquidity.”
• Gromen's base case is that stocks rise in nominal terms but fall relative to gold and Bitcoin in the long run.

Macro analyst Luke Gromen said on Friday he has sold most of his Bitcoin (BTC) and hasn’t bought back in meaningfully, citing a liquidity drain driven by artificial intelligence (AI)- related stocks and oil pulling capital away from the cryptocurrency as it slides. 

Gromen, Founder & President, Forest for the Trees (FFTT), in the Coin Stories podcast said  he had only “nibbled a little bit” in Bitcoin’s recent decline but largely had stayed out. He said he did not sell it all, but he sold most of it, adding that he sold "closer to the top than what might be the bottom." 

Gromen attributed Bitcoin’s weakness to what he described as an unhealthy market structure under record-high equity indices. The headline gains were concentrated in a few AI-related names, and market breadth was poor, said Gromen. "AI is sucking all the oxygen out of the room, all the liquidity out of the room, and it's all in one area, and I think that's happening to Bitcoin as well," he said.

Bitcoin is a warning sign about the wider financial condition, he said. "I think Bitcoin is one of, if not the last functioning smoke alarm of liquidity, and it's telling us not good things," Gromen said. He added that oil, up around 50% since the start of the Iran war, was also eating into liquidity along with AI.

Gromen holds the view that U.S. dollar-denominated stocks will continue to rise over the long term, but will depreciate relative to gold and Bitcoin. This trend stems from U.S. policies that push for the depreciation of the U.S. dollar and the reshoring of supply chains from China to the United States. 

While there are short-term intervention measures that suppress the prices of these two types of assets by expanding the supply of derivatives, such measures will not remain effective over the long run. Policymakers can push down the prices of Bitcoin and gold in the short term through the growth of derivatives, he said, but such measures “don’t matter” in the long term.

Where The Bottom Could Be

Read also: Zcash Roars Back While Bitcoin Bleeds Despite Bug Scare And Arthur Hayes Dump

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