Bitcoin ‘faces headwinds’ as US money supply drops most since 1950s
Bitcoin (BTC) and crypto may yet see a long-term correction thanks to central banks keeping liquidity tight, Bloomberg warned.
In its latest research, Bloomberg Intelligence revealed a cool stance on the ongoing 2023 crypto market rally.
Despite gaining 70% in Q1, Bitcoin is not convincing everyone that it will continue to climb or even maintain current levels near $30,000.
Examining the macroeconomic climate, Bloomberg Intelligence became the latest voice to note the close relationship between crypto performance and global central bank liquidity levels.
As inflation bites, banks have been withdrawing liquidity from the economy, with risk assets declining as a result — including crypto. The United States Federal Reserve’s quantitative tightening (QT), which began in late 2021, coincided with the current all-time high for Bitcoin.
Despite the recent banking crisis, Bloomberg noted that plunging M2 money supply and bank deposits mean that liquidity continues to be squeezed.
“Risk assets typically rise and fall on the back of liquidity and plunging US money supply, and bank deposits indicate headwinds for cryptos,” it stated in an analysis uploaded to Twitter by Bloomberg Intelligence senior macro strategist Mike McGlone.
The misgivings come as Bitcoin faces a battle to flip historical resistance back to support, with bulls as yet unable to effect major change.
When it comes to liquidity, meanwhile, others have already noted that crypto now responds to the actions of central banks other than the Fed, and both China and Japan have enacted liquidity injections this year.
“A top question at the start of April is what stops the contracting liquidity?” Bloomberg, meanwhile, continued.
A thousand words in a chart - liquidity rug-pull:It
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