Bitcoin has recently achieved a significant milestone, representing approximately 1.7% of the global money supply. This valuation, calculated by financial services firm River, considers the aggregate M2 money supply of major fiat currencies, significant minor currencies, and the market capitalization of gold. This surge in Bitcoin's relative value occurred just before Federal Reserve Chair Jerome Powell signaled potential upcoming interest rate cuts and continued monetary expansion.
Bitcoin's Growing Share of Global Wealth
River's analysis places Bitcoin's market capitalization at $2.4 trillion when it reached this 1.7% mark, though its current market cap hovers around $2.29 trillion, bringing its share to roughly 1.66%. This growth is seen as a response to central banks' inflationary policies, which devalue fiat currencies and drive investors towards alternative assets like Bitcoin and gold.
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Bitcoin's market cap is compared against a $112.9 trillion basket of fiat currencies and $25.1 trillion in hard assets (excluding silver, platinum, and palladium).
Federal Reserve Signals Potential Rate Cuts
Federal Reserve Chairman Jerome Powell's address at the Jackson Hole Economic Symposium indicated a shift in monetary policy. Powell stated that the Fed's policy rate is now closer to neutral, allowing for a more cautious approach to policy adjustments. This news spurred a positive reaction in the cryptocurrency market.
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Following Powell's remarks, Bitcoin's price saw an increase of over 2%, reaching approximately $116,000 per BTC.
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Market data from the Chicago Mercantile Exchange (CME) Group suggests that 75% of investors anticipate a 25 basis point interest rate cut in September.
Correlation Between Monetary Expansion and Digital Assets
Historically, Bitcoin and other cryptocurrencies have shown a tendency to appreciate during periods of monetary expansion. This trend is attributed to the increasing global liquidity, which often correlates with the price movements of digital assets.
Sources
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Bitcoin Accounts for 1.7% of Global Money 16 Years After Inception: River, Cointelegraph.
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BTC climbed to 1.7% of global money before Fed chair signaled rate cut — TradingView News India, TradingView.
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