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Bloomberg: Declining US Money Supply Will Halt Bitcoin Price Growth

Despite the 70% growth of the Bitcoin price in the first quarter of 2023, not all analysts believe that this digital currency can continue its upward trend or even maintain its current level of $30,000.

It is unreasonable to expect the price of Bitcoin to grow

To Report Cointelegraph, Bloomberg Intelligence, in its latest report examining the macroeconomic environment, points out the close relationship between the performance of digital currencies and the liquidity level of the central bank.

As banks withdraw liquidity from the economy during inflation, the price of risky assets, including digital currencies, decreases. The start of the contractionary monetary policies of the US Federal Reserve also began at the same time as the price of Bitcoin reached its highest level in late 2021.

Despite the recent banking crisis, Bloomberg noted that the decline in the money supply (M2 (coins and bills held by the public that can be converted into cash) and bank deposits) means that liquidity is still shrinking.

Mike McGlone, chief strategist at Bloomberg Intelligence a part From this analysis he writes:

The value of risky assets usually fluctuates as liquidity increases or the money supply decreases in the United States, and the volume of bank deposits also represents a restraining factor in the growth of digital currency prices.

He noted:

With the volume of money and the value of commercial bank deposits down 2% year-on-year (the biggest drop since 1959), it is unreasonable to expect the stock market, crude oil, copper and the Bloomberg Galaxy Crypto Index (BGCI) to maintain their recent gains. do

These concerns come at a time when Bitcoin is struggling to turn its historic resistance into a support level and buyers seem unable to make a big change in the market.

On the topic of liquidity, other analysts have already noted that cryptocurrencies are now reacting to the actions of central banks other than the Federal Reserve. It is worth noting that China and Japan injected liquidity into the market this year.

Meanwhile, Bloomberg says the main question at the start of April is what will stop the liquidity squeeze?

More central banks that continue to have contractionary monetary policies could mean a decline in the Bloomberg Galaxy Crypto Index. Our view is that Bitcoin will experience headwinds, but will eventually trade like gold and Treasuries.

The fall of the dollar index and the possibility of bitcoin price growth

According to market data, Bitcoin is currently trading in the $27,900 range.

Hourly Bitcoin price chart

In a (short-term) positive for risky assets, the US Dollar Index (DXY) once again fell below the 102 level.

Cold Blooded Shiller popular account in twitter Examining this situation, he temporarily expressed optimism about the increase in the price of Bitcoin.

However, pointing to a support level, Justin Bennett predicted that the dollar index will return to its previous level in the future.

Bloomberg: Declining US Money Supply Will Halt Bitcoin Price Growth
Daily US Dollar Index chart shared by Justin Bennett

He warned:

As long as the dollar is still the world’s reserve currency, all the slogans that say “the dollar is dead” will be meaningless.

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