Although the Federal Reserve's monetary policy may not have significantly affected Bitcoin's price movements in recent years, it has certainly influenced this financial cycle in many other ways. The United States remains the largest economy in the world and the largest provider of liquidity. Maintaining high interest rates and implementing other tightening measures throughout the cycle have lowered risk appetite and generally reduced liquidity, especially compared to the previous cycle. Among other factors (such as institutional adoption of Bitcoin and the high dilution of the altcoin market), this is why altcoins have been in a downtrend relative to Bitcoin for years.

During the last cycle, all central banks around the world implemented easing measures due to the economic weakness following the pandemic. You can see this from the flat line in the chart below from 2020-2021. This means that in addition to low borrowing costs, excess liquidity was also flooding into the financial markets, which was the main driver of the massive upward trend in all asset classes of cryptocurrencies. The difference in this cycle is that many central banks, especially in the Eurozone, have also been easing, but this time the Federal Reserve has not. This naturally means that in a market that has expanded with many token issuances over the past few years, the available liquidity has decreased.

Now, even if the Federal Reserve starts larger-scale easing in the coming months (which is still unlikely due to rising inflation), other central banks may also begin to slow down their easing cycles, making our situation no different from now, where not all major central banks are easing at the same time, which limits the growth potential of the cryptocurrency market, or at least makes a price trend similar to 2021 less likely. This is why it is important for the Federal Reserve to shift to easing early for the cryptocurrency market, as it will occur during a period when other central banks are already providing liquidity to the market. However, I do not expect the financial environment of this cycle to approach the levels of 2021.