Below is an excerpt from a recent release of Deep Dive, Bitcoin MagazinePremium Markets Newsletter. To be among the first to receive these and other on-chain Bitcoin market insights straight to your inbox, subscribe now.
yesterday, Nasdaq set a record, with the index up 67.5% since the start of 2020, and a massive 147% increase from its March 2020 low.
Regular bystanders may wonder what has made the companies within the index more valuable by 67.5% over the past 18 months, or what has caused the general belief that “stocks only go up!”
In short, the answer is simple. It’s liquidity, you idiot!
While this may be too crude and simplistic to what many may attribute to a very complex and nuanced answer, any such explanations for the massive increases in the price of bonds, stocks, and real estate over the past 18 months must be dealt with. Occam’s razor.
By observing another similar chart of global liquidity and the S&P 500 index from Holger SchaebitzIt becomes clear that stock markets are mostly not rising as a result of improved business prospects or a massive increase in profits, but rather just a proxy for global liquidity, which has risen at a record pace as a result of central bank quantitative easing programs globally.
It is important to keep in mind the long view, even with Bitcoin in the midst of a more than 50% retracement from its all-time high set in mid-April 2021.
The performance of each asset class is a function of central bank liquidity, and in an environment of unprecedented credit expansion, bitcoin is the only asset that represents a 100% cash premium, 0% anything else.
The supply of bitcoin cannot be diluted or “managed” by a team of central planners, and a new supply of cash is generated through the Proof of Work mechanism built into the protocol.
Compare this to the new units of fiat currency, which are “created” through commercial bank lending.
In this unprecedented monetary environment, where all assets rise side by side, it is necessary to remember:
It’s liquidity, you idiot.
Protect yourself with Bitcoin.