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Why Bitcoin is Behaving Like It Should

Jan 7, 2022 · 8 min read

By Kevin Kelly, CFA

Bitcoin and the broader crypto market are not isolated from macro risks, most notably those related to global liquidity and financial conditions. History suggests it isn’t rate hikes that adversely impact BTC as much as tighter liquidity conditions and heightened market volatility associated with strong risk-off sentiment. Consumer price inflation and currency debasement are two sides of the same coin, but their impact on asset prices can differ. Several macro tailwinds that helped propel BTC and crypto assets to new highs over the last 12-18 months have reversed course; the shift away from excess liquidity and accommodative monetary conditions is a structural headwind we’ve highlighted in recent months, which now appears to be coming to a head. Higher intramarket correlations lead to exaggerated corrections when volatility spikes and sentiment turns sour. This is not native to the crypto market either; traditional markets like equities often see correlations between indi

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