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Bitcoin is in the midst of a strong bull run.
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Its prior all-time highs are likely to be broken again, and soon.
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Four factors in particular could drive its price higher.
Some moments in the market don’t need dramatic catalysts; they just quietly build up momentum until something gives. For Bitcoin (CRYPTO: BTC), the stars are aligning with uncanny precision in ways that are likely to have a stunning result.
Four macro forces, each with a history of preceding major rallies in the coin, are once again in play. Here’s what’s unfolding, and why it might matter more than most investors realize.
When central banks turn on the liquidity tap and ensure there’s more money sloshing around the financial system, that new money typically flows toward riskier assets like cryptocurrency. The reason? Greater liquidity emboldens investors to take riskier bets while safer asset classes become pricey from the perspective of institutional allocators.
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The global M2 money supply reached approximately $108.4 trillion in April, following a pace reminiscent of Bitcoin’s breakout to new highs in 2021. Historically, Bitcoin’s performance lags behind this liquidity gauge by about one quarter.
Liquidity waves may eventually peak, but the cash injected rarely fully drains from the financial system. If part of that additional base money becomes permanently utilized in Bitcoin wallets, similar to prior monetary easing cycles, then holders will experience a higher floor, even after central banks begin new tightening cycles.
As the dollar’s value declines, investors often seek to park their capital in stronger assets that hold or increase in value, with Bitcoin being a potential alternative.
This year, the dollar index has dropped around 10%, marking its worst six-month decline since 1986. Additionally, fund managers are significantly underweight in the currency, based on a recent Bank of America survey.
For investors, this dollar weakness represents more than just a short-term boost for Bitcoin. A weaker dollar often coincides with looser financial conditions globally, which increases demand from countries where Bitcoin offers a liquid alternative to depreciating local currencies. This global interest tends to be persistent, as reversing currency weakness generally involves lengthy policy shifts.
Interest rates play a significant role in influencing Bitcoin’s price trajectory. As yields on government-backed debt like U.S. Treasury bills decrease, the cost of borrowing is also lowered, driving capital towards riskier assets to generate returns.
In line with this trend, benchmark 10-year yields on Treasury bonds have fallen from 4.81% in late January to the low 4% range recently. Every notable Bitcoin surge since 2017 has followed a decline in real or nominal yields.
This pattern is critical for the long term; as yields drop, investors begin to view Bitcoin as a valuable portfolio diversifier, especially when bonds yield less. This attitude can persist even as rates rise again, similar to how gold maintained its allure after rising real yields in the 1980s. The longer Bitcoin proves effective in offsetting low-yield periods, the more likely it is to become a staple in strategic asset portfolios rather than a mere tactical play.
Bitcoin’s supply situation also favors a potential run at fresh all-time highs. The upcoming 2024 halving will cut miner rewards, reducing daily issuance to around 450 coins. Institutional demand driven by exchange-traded funds (ETFs) holding Bitcoin is significantly outpacing this supply flow. Furthermore, the math behind this supply shock intensifies over time.
As prices increase even marginally, Bitcoin miners will sell fewer coins to cover operational costs, while new issuance will continue to shrink every four years. This structural constraint on supply effectively provides long-term holders a growing share of the total outstanding supply, enhancing their pricing power, as long as they resist the urge to react to short-term volatility.
The lesson here is that long-term-oriented investors should keep their eyes firmly on Bitcoin, preparing for an exciting journey ahead, as this asset has a considerable runway during the summer and beyond.
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Alex Carchidi holds positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and has a disclosure policy.
4 Undeniable Factors That Could Push Bitcoin to New All-Time Highs This Summer was originally published by The Motley Fool.
