Closely followed analyst Lyn Alden says a macro factor could signal the end of the Bitcoin (BTC) bear market.
In a new interview with market analyst Alessio Rastani, Alden says that Bitcoin’s performance is closely correlated with global money supply (M2) expanding or slowing.
M2 money supply roughly refers to the total amount of currency in circulation, plus near-money or highly liquid non-cash assets that can be easily converted into cash.
“If the global money supply measured in dollars is growing fairly quickly, that’s a great environment for Bitcoin. When it goes down, when that annual rate basically changes or even stops growing altogether, that’s usually a pretty bad environment for Bitcoin. And in that sense, what hedges bitcoin is not price inflation, but monetary inflation or debasement. It’s basically one of the purest games in terms of liquidity.
This is probably the most important thing to watch. What happens to liquidity and what happens to the rate of change of economic growth?
I think if you have falling liquidity and an economic slowdown, yes, you would expect bitcoin to do pretty poorly, which is something we’ve seen especially over the past six months. Then, if liquidity bottoms, monetary policy eases, and you’re in the midst of the recession that may be looming, then I would probably expect Bitcoin to bottom and do pretty well.”
Macro guru Raoul Pal shares exactly the same opinion. Last month, Pal said that crypto markets are largely driven by the liquidity that comes from the M2 money supply.
“Crypto is not driven by the business cycle, it is driven by global liquidity.”
At the time of writing, Bitcoin is exchanging hands for $23,859, up 2.82% on the day.
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