The money supply is the primary reason for the inflation in the areas where printed - money is used as a medium of exchange in the daily life. Though many others have a direct or indirect impact on the inflation, there is no doubt that money - printing is the inevitable cause of the loss of value in the fiat currency.
During the pandemic times, almost all of the central banks decided to support the economies with quantitative easing (QE). The process of QE is the pseudonym for printing money. As the money supply enlarged, the markets turned green and started to become a new bubble in a new cycle.
Of course this abnormal act of money printing caused a global inflation and the central banks had been fighting with the problem of inflation with their tightening, providing less money to the economy, and higher interest rates to reach their target of 2% inflation in their economies.
You can easily find the M2 money supply of the U.S economy with a simple search on TradingView.
As you can see above, there is something weird taking place in 2020 - 2021 years. As a consequence of that crazy amount of money printed, we saw 64K ATH level in Bitcoin and huge altcoin season in crypto ecosystem. Aside from crypto, the other markets had V - Shape correction which had taken place thanks to that money.
We had tested 21.72T in 2022 and the amount of money has been going down since then.
Now we have 20.867T M2 money supply as of writing. It seems like the money burning trend by the FED has been paused and there is more room for markets to recover from their local dips or corrections in the long te
To boost the crypto ecosystem, we really need that free money looking for a new house which can be high risk but high return type of investment.
As the money supply goes up, crypto is likely to follow the trend. In Q3 and Q4 2024, we can have 1 or 2 interest rate cuts + slight quantitative easing. This is the bullish scenario for all the markets in the world. Keep in mind that all markets utilize the QE, some of them just wait for their turn to come more than the others 😉
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Posted Using InLeo Alpha
