Bitcoin Trails Money Supply Growth
We have been witnessing a paradoxical situation lately - the money supply in the world is growing rapidly, but the price of bitcoin is not showing the expected explosive growth. Why isn't the cryptocurrency showing the expected price rally against the backdrop of active liquidity injection by central banks around the world?
High energy costs and restrictive monetary policy
The key factors holding back Bitcoin's growth are high energy costs and the implementation of tight monetary policy by central banks around the world. Expensive fuel and tightening financial conditions are absorbing consumers' free cash flow, preventing this liquidity from spilling over into the cryptocurrency market.
If people are forced to spend more on gasoline, electricity, and other essential goods, they have less money left for investments in risky assets like Bitcoin. And the aggressive rate hikes by central banks make investments in cryptocurrencies less attractive compared to more stable instruments.
What's Next?
Thus, as long as high inflation and monetary policy tightening continue to absorb free liquidity, Bitcoin will lag behind the growth in money supply. However, in the long run, as the situation stabilizes and consumer activity recovers, the cryptocurrency has a good chance of resuming a bullish trend. After all, the fundamental factors that determine the value of Bitcoin are still in place.