Recent research from NYDIG suggests that Bitcoin’s price fluctuations are influenced more by the strength of the US dollar and overall liquidity conditions than by inflation. Greg Cipolaro, NYDIG’s global head of research, noted that the data reveals weak and inconsistent connections between various inflation measures and Bitcoin’s value, challenging the traditional view of Bitcoin as primarily an inflation hedge.
Cipolaro emphasized that while inflation expectations might serve as a slightly better indicator than actual inflation readings, they do not predict Bitcoin prices with high reliability. Instead, both Bitcoin and gold tend to appreciate when the US dollar weakens; although gold has a long-standing inverse relationship with the dollar, Bitcoin’s similar behavior has become evident more recently.
Reports indicate that gold has a historical tendency to rise as the dollar falls. Bitcoin is now emerging as a similar asset, though its correlation with the dollar is less consistent. As Bitcoin continues to integrate with mainstream financial systems, NYDIG anticipates that its inverse relationship to the dollar will likely strengthen. This trend aligns with trading strategies where investors priced in dollars look for alternatives when the dollar loses value.
Cipolaro identified interest rates and money supply as significant macroeconomic factors impacting both gold and Bitcoin. Lower interest rates and more accommodative monetary policies are favorable for the prices of these assets. Essentially, as borrowing costs decrease and liquidity increases, Bitcoin often sees a positive response. In this context, gold is portrayed more as a hedge against real rates, while Bitcoin is framed as a measure of market liquidity, highlighting an important distinction for investors.
On the blockchain front, data indicates a resurgence in selling pressure. Reports state that the volume of illiquid Bitcoin—coins stored in long-dormant wallets—dropped from 14.38 million earlier in October to 14.3 million by the 23rd. This translates to approximately 62,000 BTC, valued at around $6.8 billion, re-entering circulation. Historically, significant inflows like this have led to price pressure: a similar occurrence in January 2024 softened price momentum.
According to Glassnode, there has been a noticeable selloff from wallets holding between 0.1 to 100 BTC, with the supply of first-time buyers decreasing to around 213,000 BTC. The overall macro assessment, combined with on-chain metrics, paints an unfavorable picture. Demand from new buyers appears to be weaker, traders focused on momentum have stepped back, and an increased number of coins are available for trading. This combination could hinder price rallies or exacerbate pullbacks until liquidity conditions improve or the dollar experiences further weakening.
