> For the complete documentation index, see [llms.txt](https://docs.coinkarma.co/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.coinkarma.co/english/indicators-guide/institutional-liquidity-index.md).

# Institutional Liquidity Index

## What is the Institutional Liquidity Index?

The Institutional Liquidity Index (ILI) measures how strongly institutional capital is supporting BTC. It runs on a 0 to 100 scale: the higher the reading, the more abundant institutional capital is; the lower the reading, the thinner it has become.

ILI tracks three sources of institutional capital:

* Corporate treasury demand: whether public companies, with MicroStrategy as the bellwether, are still buying BTC at a premium
* Net USD liquidity: whether dollar liquidity in the Federal Reserve system is expanding or contracting
* Spot ETF flows: how traditional capital is moving in and out of BTC through spot ETFs

The more abundant these three sources are, the higher ILI reads. As institutional money gradually recedes, ILI falls.

## Why Do We Need the Institutional Liquidity Index?

The bid structure of this bull market is different from the past. The main force driving price has shifted from retail to institutional capital, and whether price can hold depends on whether institutional capital keeps flowing in.\
Karma Index, CoinKarma's existing cycle indicator, mainly reflects retail sentiment; the institutional side needs a different lens. The last two cycle highs (roughly 69K and 126K) were difficult to identify from on-chain metrics or futures data, because both tops were closer to the product of large-capital buying power running out than of retail euphoria.\
Looking back at past tops, the shared feature is that price was still printing new highs while institutional capital had already started to recede. ILI is designed to identify this kind of unsupported rally and fill in the institutional view.

## How to Use the Institutional Liquidity Index

When BTC trades at a higher price but ILI prints lower than it did at the previous high, price and institutional liquidity have diverged. In this situation, price keeps making new highs, but the institutional capital supporting it is weakening. This serves as a basis for judging whether the market may be forming a top.

ILI currently grades this divergence into two tiers:

* 🟡 Yellow tag: BTC sets a rolling 30-day high while ILI diverges. Price has pushed higher again, but institutional liquidity is clearly weaker than it was at the prior peak.
* 🔴 Red tag: BTC breaks its all-time high (ATH) while ILI diverges and sits below 50. Price has broken the previous high, but institutional liquidity is already weak.

## Historical Backtest: 7 Signals from 2021 to 2026

<figure><img src="https://3881674611-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FLNdPzU6psKxnGpgv182e%2Fuploads%2FzPWoX5P56YIX8l3DHTPq%2Fimage.png?alt=media&#x26;token=158acfb8-ab02-4f67-8ea2-6754e411c7da" alt=""><figcaption></figcaption></figure>

* 🟡 Yellow tag: BTC sets a rolling 30-day high while ILI diverges

| Date       | Close     | Max gain, next 60d | Max drawdown, next 120d | Note        |
| ---------- | --------- | ------------------ | ----------------------- | ----------- |
| 2023/07/03 | $ 31,616  | +1%                | -19%                    | <p><br></p> |
| 2024/05/20 | $ 71,430  | 0%                 | -24%                    | <p><br></p> |
| 2025/01/17 | $ 104,084 | +2%                | -27%                    | <p><br></p> |
| 2025/07/09 | $ 111,239 | +11%               | -9%                     | <p><br></p> |
| 2025/10/01 | $ 118,608 | +5%                | -29%                    | <p><br></p> |

* 🔴 Red tag: BTC breaks its all-time high (ATH) while ILI diverges and sits below 50

| Date       | Close     | Max gain, next 60d | Max drawdown, next 120d | Note                     |
| ---------- | --------- | ------------------ | ----------------------- | ------------------------ |
| 2021/11/08 | $ 67,525  | -1%                | -48%                    | -77% at the one-year low |
| 2025/10/05 | $ 123,480 | +1%                | -38%                    | -53% at the current low  |

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#### **Disclaimer**

Thank you for using CoinKarma. The data provided is based on historical performance and cannot guarantee future market trends. The cryptocurrency market is highly volatile. Users must assess risks and bear responsibility for their decisions.
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