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With central banks announcing rate cuts global liquidity is likely to rise. But where will all that new money flow? One thing's for sure.... as fiat currency continues to get debased, it probably makes a lot of sense to find somewhere more stable to park your long term wealth.
The US Federal Reserve has unofficially declared the war on inflation “over.” Considering we are still about a half percentage point over the target 2% inflation rate, this seems premature, but they must be seeing cracks in the economy that, in their minds, justify the move.
Rate cuts indicate a move toward quantitative easing and, therefore typically, an increase in global liquidity: more currency in the system.
This will likely happen as loans become more affordable for people and banks get to create money to lend out of nothing. In other words, lots more paper money floating around the economy.
Historically, this has fared well for Bitcoin’s exchange rate in terms of dollars, euros, and other fiat currencies. As more money enters the market, we tend to see asset prices increase (asset price inflation) and, for now, Bitcoin tends to correlate closely with global liquidity, as shown below:
Now, we’ll have to wait and see on the Fed’s next few moves if the trend remains intact, but the market seems to be thinking more rate cuts are coming.
More rate cuts = more dollars = more inflation = runs to hard assets.
And Bitcoin, with its finite supply and predictable monetary policy, is the ultimate hard asset.
The chart above clearly demonstrates how increases in global liquidity tend to prompt Bitcoin bull runs. How and when this happens is anybody’s guess, but it seems reasonable to expect it may be coming soon.
Rather than speculating on precisely when, it’s crucial to remember that time in the market is more important than timing the market. Most value captured by Bitcoin happens over the course of a handful of days if we look back over time.
In a world where money printing seems more and more probable, saving in a safe, secure, store-of-value like Bitcoin makes a lot of sense.
If you haven’t already gone down the Bitcoin rabbit hole, now would be a good time to do so - and quickly. If you already have a Bitcoin stack, fasten your seatbelt, hold on tight, and don’t sell, take on leverage, or trade.
As Bitcoin reaches new heights, there will be temptation to exchange it for fiat to buy that new Lamborghini or bigger house. But Bitcoin-to-dollar exchange rate increases bring more validity to Bitcoin as a legitimate form of money and as a savings vehicle.
If you opt out of Bitcoin for paper that can be printed without end, you may regret the price you’ll pay.
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