U.S. Debt and Money Supply Dynamics: Bull Market Expectations in the Crypto Market
Today, I will discuss the possibility of the U.S. shifting toward expansionary monetary policies in response to rising national debt and how this could potentially trigger bullish movements in the cryptocurrency market. #PowellAtJacksonHole
In the chart below, the blue line represents the total U.S. national debt, while the red line depicts the M2 money supply:
What Does This Chart Tell Us?
Since 2000, we can observe a consistent increase in the U.S. debt burden, which has been accompanied by an expansion in the money supply. Notably, in 2020, during a period when external debt sharply increased (as indicated by the black arrow), there was a corresponding spike in the money supply. I have previously discussed how the money printed during this period was a primary driver of the 2020 crypto bull market; you can find more details in my pinned tweet. #BTC
In 2020, the U.S. turned to expansionary monetary policies to manage its rising debt. By the second quarter of 2022, the money supply had reached its peak, but it has since started to decline. However, the debt level has continued to rise steadily. At the point marked by the red arrow, we can see that the debt has begun to exceed the money supply.
For a new bull market in the crypto space, we need abundant liquidity and the return of cheap money. This requires the #FED to lower interest rates and resume expansionary policies. There is currently an expectation of a rate cut in September. If this occurs, cheap money could re-enter the market, which would be a major catalyst for the next crypto bull market.
Please note, this post is not financial advice; it reflects my personal views. I recommend making your investment decisions based on your own analysis.
