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Macro regimes BTC favours - Coggle Diagram
Macro regimes BTC favours
1 High inflation & weak monetary credibility
Bitcoin: structurally supportive (medium term
. But it is not a mechanical hedge against CPI inflation. Historically:
Bitcoin has failed to protect portfolios during sudden inflation shocks.
It performs better when inflation becomes persistent and politicised.
Deeply negative real interest rates matter far more than headline inflation.
2 Monetary tightening and rising real rates
Bitcoin: short term headwind
Aggressive tightening and rising real yields pressure Bitcoin by reducing liquidity and raising the cost of holding non-yielding assets.
Bitcoin tracks real interest rates more closely than inflation—weakening as real yields rise and recovering once they peak.
Historically, Bitcoin bottoms before monetary policy pivots, as tightening clears leverage and sets up the next rally.
3 monetary easing and liquidity expansion
3 Bitcoin: highly favourable
Falling real rates and expanding liquidity make Bitcoin outperform, as lower opportunity costs and its fixed supply amplify upside.
Bitcoin’s major bull cycles align with accommodative policy and often start ahead of actual easing, reflecting its sensitivity to liquidity expectations.
Its forward-looking nature highlights Bitcoin’s convex upside, especially early in easing phases when confidence in policy returns.
4 financial stress, crisis and systemic risk
In crises, Bitcoin initially falls with other risk assets as investors seek liquidity, showing it isn’t a classic crisis hedge.
Its value rises afterward, driven by policy responses like monetary expansion or capital controls that highlight its non-sovereign nature.
Historically, Bitcoin bear markets align with liquidity withdrawal, while its recoveries follow policy reactions to financial stress.
5 strong growth, stable policy, low inflation
Strong growth, stable policy, and low inflation make Bitcoin least attractive, as fiat works well and real yields stay positive.
Low volatility reduces speculative demand, further limiting Bitcoin’s appeal.
Such stable macro regimes are rare and typically short-lived since 2008.