CandleFocus

Bitcoin outperforms during periods of monetary expansion

Author: Content Editor
Bitcoin (BTC) may benefit from a more dovish Federal Reserve, as it tends to thrive during periods of monetary expansion and low interest rates. The recent rate cut by the Fed sparked a rally in BTC, pushing it towards all-time high prices. BTC also relies on liquidity within the crypto world, and increased money supply may attract retail buyers and institutions seeking price discovery and outperformance. The rate cuts may act as a background factor for BTC's price appreciation. Research shows that during periods of monetary expansion, BTC outperforms the stock market by 4x and gold by up to 20x. BTC may retain its correlation with gold but has faster mechanisms for price discovery and short-term outperformance. BTC has historically reacted to rate cuts and has grown during periods of low interest rates. However, it also rose during the recent series of rate hikes. BTC can behave as both a risk-on asset, tracking economic expansion, and a hedge against inflation and money debasement. On the positive side, easier access to liquidity may increase demand for BTC investments, while on the downside, crypto projects holding T-Bills may see decreased revenues with lower interest rates.

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