Bitcoin: The Role of Global Liquidity in Driving Bull Markets
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Changes in global liquidity highlight Bitcoin's sensitivity to the economic environment. Against the backdrop of quantitative tightening and optimistic expectations, funds may shift from low-risk assets to high-risk assets, including Bitcoin, driving up its price.
Liquidity-Driven Price Trends
The price movement of Bitcoin is closely related to changes in global M2 (money supply). For example, during COVID-19, a significant injection of liquidity pushed Bitcoin prices to new highs. Currently, despite the Federal Reserve's commitment to quantitative tightening, global liquidity has slightly rebounded, providing support for a Bitcoin price rebound. If the Federal Reserve intervenes due to a treasury market crisis, leading to further liquidity growth, Bitcoin may see a new breakout in 2024.
Market Sentiment and Price Outlook
The Greed and Fear Index shows that market sentiment is shifting from pessimistic to neutral-optimistic, consistent with the trend of increasing liquidity. This improvement in sentiment, coupled with demand for high-risk assets, may drive Bitcoin further upward. However, uncertainties related to policy or geopolitical issues may suppress the upward momentum, prompting investors to closely monitor changes in sentiment.
Social and Network Activity as a Barometer
Bitcoin's social activity and network participation are steadily rising, although still below the peak levels of the 2021 bull market. This indicates that market interest is recovering, but has not yet reached a state of overheating. At the same time, the increase in active addresses shows enhanced network demand, supporting a bullish outlook for Bitcoin.
Looking Ahead
The bullish outlook for Bitcoin depends on the interaction of global liquidity, market sentiment, and network activity. If systemic risks prompt policy easing, capital inflows may accelerate Bitcoin's upward trend. However, uncertainties remain, and investors should remain flexible in responding to market dynamics.
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