Analysis of the Impact of Macroeconomic Factors on the Bitcoin Bull Run

This article explores how macroeconomic factors such as global liquidity, interest rates, inflation, and Federal Reserve announcements influence Bitcoin's price performance during a bull run. By analyzing historical data since 2014, we identified some key trends and correlations, providing valuable market insights for investors.

Global Liquidity and Bitcoin Price

Global liquidity has a significant impact on asset prices. We mainly use the M2 money supply to measure the overall liquidity level. Historical data shows that peaks in M2 growth often coincide with Bitcoin bull runs:

• Bull run from 2011 to 2013: During the European financial crisis, central banks increased liquidity, and Bitcoin rose from $2.93 to $329.
• 2015-2017 bull run: Low interest rates and increased money supply continued, Bitcoin rose from $200 to $19,000.
• 2020-2021 bull run: Pandemic stimulus measures significantly increased M2, Bitcoin rose from $10,000 to $64,000.
• 2024 bull run: Despite the overall slowdown in liquidity growth, Bitcoin still reached new highs, reflecting the maturity of the market.

It is worth noting that altcoins seem to rely more on liquidity growth. Data shows that the altcoin/Bitcoin pair is positively correlated with global net liquidity estimates.

The Impact of Interest Rates and Inflation on Bitcoin

Although Bitcoin is designed to be decentralized, it shows significant volatility in response to monetary policy events:

• Before 2013, the Federal Reserve's monetary shock lowered the Bitcoin price.
• After 2013, these shocks began to drive up Bitcoin prices, indicating a change in market sentiment.
• The European Central Bank's de-inflationary impact has consistently lowered Bitcoin prices, indicating that Bitcoin is performing as digital gold in Europe.

Since 2020, Bitcoin has reacted more swiftly to Federal Reserve announcements, similar to other risk assets but more dramatically. The recent release of CPI data has also triggered rapid fluctuations in Bitcoin's price, reflecting an increased sensitivity to inflation data.

Conclusion

The relationship between Bitcoin and macroeconomic factors is evolving. Initially driven mainly by its characteristics as a decentralized digital currency, in recent years, its sensitivity to monetary policy and inflation data has significantly increased. Global liquidity remains a key factor influencing Bitcoin prices, but its response to interest rates and inflation has also become more rapid and pronounced.

For investors, closely monitoring changes in global liquidity, monetary policy trends, and inflation data releases will help grasp the market trends of Bitcoin. At the same time, the maturity of the Bitcoin market also means that its price performance may become more complex, requiring a comprehensive consideration of multiple factors.