The fiat printer is back on and Bitcoin investors know what that means

After almost a year of consolidation, Bitcoin appears to have started a fresh rally. That rally coincides with the end of Q3. The world’s largest cryptocurrency has spent weeks holding above the key support zone of $60.000, a level many investors regard as the litmus test for the survival of the current bull market. With the price moving higher again, confidence is growing that the long-awaited next phase of the four-year Bitcoin cycle has begun.

Crypto winter

Historically, periods of weakness or sideways price action in Bitcoin have often lasted around a year. In crypto circles, such phases are often described as a “Bitcoin winter” or a “crypto winter”. When that winter nears its end, a new period of rising prices usually follows. Although the past offers no guarantees for the future, many market observers today see striking parallels with earlier cycles.

Another signal drawing attention is the Bitcoin-to-gold ratio. Last year Bitcoin was priced relatively expensively compared with the precious metal. Today the picture is reversed. Measured against gold, Bitcoin again looks attractively priced. In previous market cycles, such a situation often coincided with a major bottoming-out, after which a new upward trend followed. For investors who view Bitcoin as digital gold, this is a development that has not gone unnoticed.

Interest rates

The big question, of course, is why this shift is taking place. The answer may lie not only in the crypto market itself but in the broader economic context. The global economy is in a new structural regime in which capital is no longer available at virtually no cost. Higher interest rates and rising financing costs are putting governments worldwide under pressure.

History teaches that in such circumstances policymakers often resort to financial repression: reducing the real value of debt through inflation, low real returns and loose monetary policy. In other words, the money printer will eventually be switched on again. In a world where the purchasing power of fiat money comes under further pressure, scarce assets such as gold and Bitcoin appear to be in a favourable position once again. That may well be the most important message the market is trying to send today.