Bitcoin Liquidity Barometer: NYDIG's Striking Findings

Recently, Bitcoin (BTC) price movements continue to attract the attention of investors. However, NYDIG’s new report contradicts the widespread belief that Bitcoin provides protection against inflation. The crypto research company has revealed that the connection between Bitcoin prices and inflation data is weak and inconsistent.

NYDIG's global research director Greg Cipolaro emphasized that there is no significant relationship between Bitcoin and inflation rates as a result of monthly correlation analyses. Cipolaro stated, “The community likes to see Bitcoin as a hedge against inflation. However, the data does not strongly support this claim.”

The same attitude applies to gold, a traditional inflation hedge. The relationship between gold and inflation often shows a negative correlation. So, what truly drives Bitcoin? According to the NYDIG report, the main determinants of Bitcoin and gold prices are real interest rates and money supply.

Historical data indicates that gold tends to gain value when real interest rates decline. Bitcoin has also started to exhibit similar behavior as it becomes more integrated with the financial system. Cipolaro noted that in recent years, the inverse relationship between Bitcoin and real interest rates has strengthened, stating that this is a result of the cryptocurrency's increasing interaction with the global financial system.

NYDIG’s findings suggest that investors should now view Bitcoin not as an inflation hedge but as a liquidity indicator. In other words, the price of Bitcoin moves in relation to interest rates and global capital flows, rather than food or energy prices. Cipolaro concluded his report by saying, “Gold is the protector of real interest rates, whereas Bitcoin has become the barometer of liquidity.” These findings indicate that investors need to reassess their strategies.