Part 6/9:
The cryptocurrency market is not purely driven by its intrinsic mechanics but also significantly influenced by macro-economic factors. The last few decades have shown that only technology and finance sectors have outperformed inflation rates, making cryptocurrencies ideal hedges against inflation.
As central banks and governments inject liquidity to combat inflation, this newly generated money gradually trickles down to riskier assets, including cryptocurrencies. The flow of liquidity follows a pattern: it first enters safer assets like government bonds and slowly moves into stocks, eventually reaching the cryptocurrency market. This delay can stretch for months after new liquidity is introduced, leading to the unpredictable nature of market reactions.