Bitcoin (BTC) Price May Rally Again as Liquidity Injection Concerns Rise

Bitcoin grew by 150% CAGR during the 2020 liquidity boom. That is much higher than NASDAQ and gold. As uncertainties about another liquidity injection rise, investors look at Bitcoin and its capacity to remain the leading asset again.

Bitcoin has outperformed traditional assets during periods of increased liquidity, prompting speculation on its behavior as monetary policy continues to ease.

During the 2020 liquidity boom, Bitcoin experienced a 150% CAGR, surpassing NASDAQ and gold by a significant margin. As discussions about another liquidity injection gain momentum, investors are considering Bitcoin's potential to once again lead the way among major assets.

Bitcoin's Performance During Monetary Expansion

In 2020, amidst the COVID-19 pandemic, central banks, particularly the Federal Reserve, infused vast amounts of money into the economy to mitigate the impact of the crisis. In the United States, the M2 money supply alone expanded by $6 trillion.

According to data from Ecoinometrics, Bitcoin emerged as the most lucrative asset during this period, achieving a CAGR of 150%. This outpaced NASDAQ by a factor of four and gold by an impressive factor of 20.

In periods of high inflation, Bitcoin has often been sought after as a store of value due to its decentralized nature and limited supply, making it an attractive hedge against fiat currency devaluation.

This ability to out-perform traditional assets during periods of increased liquidity has further enhanced Bitcoin's appeal among both institutional and retail investors.

Current Economic Landscape and Future Outlook

At present, global economies are not experiencing the same level of monetary growth as in 2020, which has contributed to a relatively stable price for Bitcoin, without the drastic fluctuations observed during periods of rapid liquidity expansion.

However, experts anticipate that the substantial global debt and budget deficits may eventually compel central banks to introduce additional liquidity into the market. If another round of monetary expansion occurs in the future, Bitcoin could be poised for another rally.

Ecoinometrics also highlights that Bitcoin tends to perform best during periods of fiat currency devaluation, leading to expectations that it could out-perform NASDAQ and gold in the next liquidity-driven market.

U.S. Elections and Their Role in Bitcoin's Future

Another factor that could influence Bitcoin's price is the upcoming U.S. presidential election, which has implications for the cryptocurrency market.

According to Bernstein analysts, if Trump wins the election, Bitcoin could rally past its previous all-time high of $73,949. This is due to Trump's administration being more supportive of policies that encourage the growth of cryptocurrencies.

Moreover, Trump's recent engagement with the crypto market has further solidified his stance as a pro-crypto president.

On the other hand, Democratic candidate Kamala Harris has also expressed plans to introduce clearer guidelines for approaching cryptocurrencies. Both candidates' perspectives can be interpreted as positive for Bitcoin, irrespective of the outcome of the election.

Standard Chartered has predicted that Bitcoin could reach $150,000 in the event of a Trump victory. Others anticipate a price of $200,000 by 2025, regardless of the election results.

Bitcoin's Current Price and Market Sentiment

In mid-October 2024, Bitcoin surged past $67,000, marking a significant recovery and pushing its market cap to $1.33 trillion. Over the past year, Bitcoin has delivered a 142% increase, driven by growing adoption and renewed confidence in the crypto space.

This comes after market analysts noted that the crypto market had broken a seven-month falling trend, positioning the coin for further gains. With buyers facing pressure and challenging key technical barriers, many traders are optimistic about Bitcoin's short-term price direction.

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