Bitcoin’s Relationship with Global Liquidity
This amount recently approached trillion, nearing the remarkable 0 trillion mark. The previous high was around trillion, coinciding with Bitcoin reaching a record ATH of ,000 in March this year and trillion when it hit its maximum of ,000 in November 2021.
Looking ahead, the outlook for Bitcoin seems encouraging, particularly if the trend of rising global liquidity continues. Central banks globally are expected to maintain or even enhance their liquidity strategies to bolster economic recovery, potentially further propelling Bitcoin’s upward movement. This is particularly significant for Australian investors, who are increasingly considering Bitcoin as a safeguard against traditional financial systems and inflation.
Increased global liquidity tends to promote investment in riskier assets, including Bitcoin. Historical data acknowledges a strong association between liquidity growth and Bitcoin bull runs. Typically, the creation of more money leads central banks to reduce interest rates and adopt quantitative easing, a pattern that has recurred throughout Bitcoin’s history.
After a brief decline below ,000 last month, Bitcoin has rebounded to approximately ,500. With global liquidity reaching new heights, Bitcoin seems well-positioned to further its bull rally.
As per Bitcoin Magazine Pro’s data, the worldwide money supply, referred to as global liquidity, has surged to an unprecedented trillion. This essential metric is closely monitored by Bitcoin investors and analysts, as a rise in liquidity has historically foreshadowed significant bull markets.
Source: bitcoinmagazine.com
Past Patterns and Future Prospects
The historical link between global liquidity and Bitcoin’s price fluctuations, coupled with the current upward trend in liquidity, implies that Bitcoin may be on the cusp of another considerable bull market. Australian investors, especially, should closely monitor these developments while planning their investment approaches in the rapidly changing crypto landscape.
Additionally, Bitcoin’s limited supply, capped at 21 million coins, enhances its attractiveness in times of expanding money supply. Unlike fiat currencies that can be produced endlessly, the scarcity of Bitcoin bolsters its appeal as a store of value. This quality is particularly enticing for those aiming to diversify their portfolios and safeguard their assets against potential depreciation of standard currencies.
Global liquidity represents the total amount of money flowing within the global financial network. It includes the M2 money supply from leading economies such as the U.S., China, EU, and Japan. The M2 category covers cash, bank deposits, money market mutual funds, and various other near-cash assets.
A retrospective examination of Bitcoin’s past reveals a distinct trend where rising global liquidity has frequently preceded notable price increases. For example, in March of this year, when global liquidity hit about trillion, Bitcoin surged to a new all-time high of ,000. Likewise, in November 2021, when liquidity peaked at trillion, Bitcoin reached ,000. Such historical patterns indicate that Bitcoin’s pricing is highly reactive to changes in global liquidity.
Numerous investors perceive Bitcoin as a viable alternative to the central banking system due to its predetermined supply schedule. Should the current trend of increasing liquidity persist, Bitcoin may be set for another price spike.
