As unrest spreads across Gulf countries following Iran’s retaliatory response to a U.S. and Israeli strike that killed Supreme Leader Ayatollah Ali Khamenei on Saturday, geopolitical risks are spilling over into global financial markets.
Oil prices and equity markets have already begun reacting to the news, while the crypto sector—including the largest cryptocurrency, Bitcoin—has seen only modest losses and remains relatively resilient.
Macro Signals Suggest a Potential Liquidity-Driven Expansion
A prominent crypto analyst with a PhD in science and engineering, Sminston With, is highlighting fresh macroeconomic signals that could mark the start of a liquidity-driven market expansion, with significant implications for Bitcoin and other risk assets.
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In a February 28 post on X, Sminston With noted that the U.S. manufacturing sector, measured by the ISM Purchasing Managers’ Index (PMI), appears to be emerging from the longest contraction in the index’s history, which dates back to 1945.
PMI Cycle Points to Imminent Expansion
The analyst shared a detailed chart showing the full PMI series since the 1940s, highlighting historical expansion periods, or readings above the key 50 threshold.
The latest PMI reading sits at 52.6, firmly in expansion territory, following a stretch of sub-50 readings. Historical data reinforce the thesis: the mean duration of past expansions is 2.6 years, and the median is 2.3 years.
The accompanying histogram and timeline of expansion lengths indicate that the current cycle has already deviated from the norm, suggesting that the prolonged contraction phase may be over.
“We may now be coming OUT of the longest PMI contraction in the index’s history,” Sminston notes.
Multiple Catalysts Could Fuel Liquidity
The analyst also listed several converging factors that could accelerate the transition into a full expansionary phase.
These include the appointment of a new Federal Reserve chair, anticipated regulatory clarity in the crypto sector, ongoing geopolitical tensions, and war-related spending.
The analyst also noted that Bitcoin is currently trading at “extremely oversold” levels and highlighted expected “MASSIVE money printing” via fiscal and monetary stimulus as a key driver likely to boost liquidity for risk assets.
On the Flipside
- Critics argue that PMI covers only manufacturing, which represents roughly 11% of GDP. Broader services data and actual liquidity measures might be more relevant.
Why This Matters
While PMI readings offer a supportive signal, they are not predictive on their own. Traders and investors should consider them as one piece of a complex macro and market puzzle.
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People Also Ask:
The PMI signals the health of the manufacturing sector, which can influence economic growth expectations and investor sentiment in equities, crypto, and other risk assets.
Rising PMI can indicate a stronger macroeconomic environment and increased liquidity, which may support risk assets like Bitcoin, although it is not a direct predictor.
No. PMI is one signal among many. Traders should also consider services data, liquidity measures, geopolitical developments, and crypto-specific catalysts.
