Since mid-December, cryptocurrencies have faced significant challenges. Early year stability remained elusive, with many assets falling below 2021 levels.
Current Cryptocurrency Market
Since the beginning of 2023, cryptocurrencies have faced numerous challenges. Investors hoping for a market recovery have been left without the expected upward trend, and alternative coins have also fallen short of expectations.
The Impact of Global Liquidity
An increase in global liquidity generally supports riskier assets like cryptocurrencies. The fundamental principle is that as more funds become available, the higher the probability of cryptocurrency price appreciation.
Factors Behind Cryptocurrency Growth
The growth of the M2 money supply correlates with the increase in cryptocurrency values. Historical data show a strong correlation between Bitcoin's price and the global M2 measure. The Federal Reserve's stance on interest rates plays a crucial role in this.
Expanding global liquidity positively influences cryptocurrency prices. To achieve significant growth, a reversal in balance sheet contraction and an increase in M2 by the Federal Reserve is required.
