
As Bitcoin continues to carve out a larger and larger share of the global financial system, the question of what truly drives its price has never been more important. For years, commentators have pointed to “Fed liquidity” as the main force behind Bitcoin’s price action. But as I argue in my latest video, this explanation doesn’t hold up under scrutiny. Instead, the evidence strongly suggests that fiscal flows—not monetary liquidity—are the true driver of Bitcoin’s long-term price trajectory.
Why “Fed Liquidity” Falls Short
In the post-COVID era, analysts have been quick to tie Bitcoin’s movements to changes in so-called Fed liquidity. Whether through quantitative easing (QE), reverse repos, the Treasury General Account (TGA), or reserve balances, the idea was that when the Fed injected liquidity, Bitcoin’s price would rise.
But there’s a fundamental flaw in this argument: Fed liquidity only swaps assets, it doesn’t add new ones. QE and related tools merely change the composition of private sector balance sheets; they don’t create new net financial assets. That means there’s no direct channel for these measures to bid up Bitcoin—or any other financial asset—in a sustainable way.