NYDIG researchBitcoin’s price movements are more influenced by the US Dollar and liquidity than inflation.
Greg Cipolaro of NYDIG, the global head for research, stated that data shows weak and inconsistent connections between inflation Bitcoin and measures The old story that Bitcoin was primarily an inflation hedge is no longer relevant.
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The Inflation link is weak
Cipolaro claimed that inflation expectations were a more accurate indicator than the headline readings of inflation, though they are not as good a predictor for Bitcoin. price.
Bitcoin and Gold tend to rise when the US dollar falls. Bitcoin has a newer, but still visible movement in the opposite direction of the dollar.
Gold and Bitcoin react to Dollar Movements
According to reports gold Gold has historically increased as the US dollar fell. Bitcoin follows this pattern though it is not as consistent as gold.
NYDIG predicts that the inverse relationship between Bitcoin and the dollar is likely to strengthen as Bitcoin’s mainstream financial connections increase.
This is a sensible move for traders, who tend to price all their products in dollars. They will then look at alternatives when they lose purchasing power.
Interest Rates and Money Supply
Cipolaro showed that interest rates and the money supply are two macro levers which move gold and Bitcoin.
Higher prices of these assets are largely due to lower interest rates, and an easier monetary policy.
Bitcoin benefits when lending costs fall and liquidity is increased. The note framed gold as more of a real-rate hedge, while Bitcoin is described as acting like a gauge of market liquidity — a subtle but important distinction for investors.
Illiquid Supply Drops, Selling Pressure Returns
Data from the on-chain show renewed signs of selling. Reports say illiquid Bitcoin — coins held in long-dormant wallets — fell from 14.38 million earlier in October to 14.300 million on the 23rd of October.
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This change means that approximately 62,000 BTC worth around $6.8 billion, at current prices, will be returned to circulation. In the recent past, huge inflows of coins did put pressure on prices. The price trend slowed down in January 2024 when a large amount of coins was made available.
Glassnode has reported that there have been consistent sales of wallets containing between 0.1 BTC and 100 BTC. The supply for first-time purchasers has also decreased, to around 213,000 BTC.
Overall, the macro-perspective and metrics on chain are not positive. The demand from new buyers seems to be lower, momentum traders seem to have left the market, and there are more coins available for trading. It can be used to dampen or intensify rallies while also allowing the dollar to weaken.
Chart from TradingView, with Gemini as the featured image
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Source: www.newsbtc.com
