Inflation expectations heat up, Bitcoin bull market logic re-emerges: Analyzing digital asset allocation from policy deadlock

How Geopolitics Triggers a Shift in Monetary Policy

Recent discussions about U.S. foreign policy and crypto market trends have revealed an interesting logical chain: when governments face conflicting policy objectives, monetary expansion often becomes a solution. Taking Venezuela’s oil policy as an example, pursuing low oil prices, stimulating economic growth, and responding to election cycles simultaneously presents significant challenges under traditional fiscal constraints.

Expert analysts point out that a typical way to resolve such policy dilemmas is by increasing the money supply to support fiscal spending. Historically, during major election cycles, similar patterns of monetary expansion have repeatedly occurred. This observation provides direct insights into the current Bitcoin market.

Evidence of Bitcoin as an Inflation Hedge

Data shows that during the large-scale monetary expansion of 2020-2021, Bitcoin appreciated about 500% relative to the US dollar. During the same period, the US M2 money supply grew by 27%. Comparing this to the 6% M2 growth and 1300% Bitcoin appreciation between 2017-2018, while causality cannot be simply inferred, the temporal correlation is noteworthy.

The underlying logic lies in Bitcoin’s fixed supply mechanism—set at a total of 21 million coins—standing in stark contrast to the unlimited expansion of traditional fiat currencies. When fiat faces devaluation pressures, this scarcity design naturally makes Bitcoin an attractive store of value.

Current Market Data: Bitcoin (BTC) is trading near $90.59K, with a 24-hour decline of -0.16%, still within a high-range historically. This price reflects market expectations about future policy directions.

From Single Assets to Diversified Portfolios: Market Maturity

Interestingly, investors who are purely bullish on Bitcoin are adjusting their crypto allocations—adding more to privacy coins and DeFi assets, while reducing Ethereum exposure. This seemingly contradictory strategy actually reflects an upgrade in market cognition.

During large-scale monetary stimulus cycles, different crypto assets often perform differently. Privacy-focused assets, due to their unique financial privacy features, may gain excess returns amid rising regulatory discussions. ZEC (Zcash) recently performed well, with a 24-hour increase of +4.16%, trading at $398.16, indicating market recognition of privacy needs.

Meanwhile, Ethereum (ETH price $3.11K, 24-hour increase +0.34%) allocation has decreased, showing investors’ differentiation between “store of value” and “functional” assets.

The Art of Balancing Technical and Macro Perspectives

In today’s uncertain geopolitical and monetary policy environment, blindly relying on macro forecasts often leads to biased decisions. A more prudent approach is to combine technical indicators to assist judgment.

Quantifiable metrics such as exchange liquidity depth, derivatives market positions, on-chain transaction behaviors, can directly reflect actual market actions. These indicators are more valuable than political predictions because they record real capital flows and risk preferences.

Specifically, key operational monitoring points include:

• Wallet activity of large holders (whales) and exchange inflows/outflows
• Futures market long-short ratios and leverage usage
• On-chain transfer fees and active addresses, reflecting market engagement

Venezuela’s Oil Reserves and the Global Energy Landscape

An often-overlooked background: Venezuela holds the world’s largest proven oil reserves, exceeding 300 billion barrels. This resource endowment determines its strategic position in the global energy market. Any adjustments to its oil export policies will pressure international oil prices, thereby influencing global economic growth expectations and monetary policy directions.

The interaction between geopolitics and commodity markets ultimately transmits through monetary policy adjustments—low oil prices support consumption but require increased liquidity to offset fiscal pressures, leading to rising dollar depreciation expectations.

The Complete Transmission Chain of the Bull Market Logic

Summarizing the current Bitcoin bull market’s supporting logic:

Policy Level: Geopolitical considerations → Policy goal conflicts → Monetary expansion pressure

Market Level: Increased USD supply → Devaluation expectations → Rising demand for alternative assets

Asset Level: Bitcoin’s scarcity + decentralization → Capital reallocation → Price appreciation

Investment Level: Pure Bitcoin allocation → Diversified portfolio (privacy coins, DeFi) → Sector rotation gains

This comprehensive logical chain is based on fundamental economic principles, not solely on technical or sentiment analysis.

Practical Dilemmas and Solutions for Investors

Faced with macro uncertainties, retail investors often find themselves at a crossroads: trust macro analysis or technical signals? The optimal approach is to use macro judgments as long-term guidance, while employing technical and liquidity data to time entries and exits.

This strategy avoids over-reliance on uncontrollable factors while leveraging macro trend insights. For crypto assets like Bitcoin, with a medium-term bullish outlook, optimizing entry points and position management can be achieved through exchange liquidity and derivatives data.

Frequently Asked Questions

Q: Why do U.S. policy adjustments directly impact Bitcoin prices?

A: Not directly, but through a clear transmission chain: policy goal conflicts → monetary expansion → USD devaluation → alternative assets appreciation. Bitcoin’s scarcity design makes it a preferred hedge.

Q: Are there historical examples of monetary expansion coinciding with asset appreciation?

A: The most typical period is 2020-2021, with M2 growing 27% and Bitcoin appreciating 500%. The 2017-2018 cycle also showed similar patterns; although correlation does not imply causation, the regularity is evident.

Q: Why diversify into privacy coins instead of holding only Bitcoin?

A: During monetary stimulus cycles, assets tend to rotate. Privacy technology assets may gain excess returns amid rising regulatory focus, representing portfolio optimization rather than abandoning Bitcoin. The recent rise of ZEC exemplifies this logic.

Q: How to ensure the accuracy of geopolitical forecasts?

A: Complete certainty is impossible; thus, technical and liquidity data should be primary decision bases, with macro judgments serving as a reference framework. This approach helps mitigate systemic risks from forecast errors.

Q: Which quantifiable indicators should be monitored?

A: Large inflows/outflows on exchanges, futures long-short ratios, active on-chain addresses, whale wallet movements, etc. These indicators reflect real capital behavior and are more reliable than news or sentiment.