Bitcoin Decouples From Global Liquidity: Analyst Says Quantum Threat Behind It

Overview

Bitcoin has recently decoupled from the global M2 supply for the first time, a significant shift noted by the founder of Capriole Investments. This divergence raises questions about the underlying factors contributing to this phenomenon and its implications for the cryptocurrency market.

Bitcoin’s Divergence from Global M2 Supply

In a recent post, Charles Edwards, the founder of Capriole Investments, highlighted that Bitcoin has experienced a notable decoupling from global liquidity flows. This observation is based on a comparative analysis of the year-over-year (YoY) percentage change in Bitcoin against the global M2 supply. The data indicates that while the M2 supply in major economies has continued to grow, Bitcoin’s YoY change has plateaued. This marks a significant departure from the historical pattern where Bitcoin’s performance generally mirrored the trends in global liquidity.

Edwards emphasized that this is the first instance of Bitcoin’s decoupling from the money supply and global liquidity flows. He attributes this shift to the emerging threat of quantum computing, which poses potential risks to Bitcoin’s cryptographic security. Quantum computers are believed to have the capability to undermine the cryptocurrency’s cryptography, particularly affecting older wallets that were established during Bitcoin’s early days.

While the timeline for quantum computing breakthroughs remains uncertain, Edwards posits that Bitcoin has entered a “Quantum Event Horizon.” He suggests that the likelihood of a quantum machine being able to break Bitcoin’s cryptography is now shorter than the time required to upgrade the Bitcoin network to counteract such threats. In practical terms, this means that a sufficiently advanced quantum computer could potentially access dormant wallets and sell the coins on the market, creating direct implications for Bitcoin’s price and the overall trust in the cryptocurrency.

From Author

The discussion surrounding Bitcoin’s decoupling from global liquidity highlights a critical intersection of technology and finance. The implications of quantum computing on cryptocurrencies are profound, suggesting that the industry must evolve in response to emerging technological threats. Edwards’ analysis serves as a reminder of the ongoing need for vigilance and adaptability within the crypto space, particularly as it relates to security and investor confidence.

Impact on the Crypto Market

• Bitcoin’s decoupling from global M2 supply could signal a shift in investor sentiment and market dynamics.
• The potential risks posed by quantum computing may lead to increased scrutiny of cryptocurrency security measures.
• If quantum threats materialize, it could trigger significant volatility in Bitcoin’s price and broader market reactions.
• The relationship between Bitcoin and traditional liquidity flows may continue to evolve, influencing investment strategies and capital allocation.
• Ongoing weak demand for Bitcoin spot exchange-traded funds (ETFs) could further complicate market conditions, as evidenced by recent outflows.