Current State of Bitcoin and Ethereum Amidst Macroeconomic Challenges
In light of the tumultuous trajectory that Bitcoin and Ethereum have encountered in recent times, characterized by significant price depreciation and an unprecedented decline in the Crypto Fear & Greed Index, a return to foundational analysis appears both prudent and necessary for cryptocurrency investors. The prevailing sentiment within the market may be one of trepidation; however, the underlying principles that govern the valuation of these digital assets remain steadfast.
As articulated by macroeconomic analyst James Lavish, the narrative surrounding Bitcoin transcends the ephemeral fluctuations in price or transient market sentiment. Instead, it is fundamentally intertwined with systemic fiscal policies and the inexorable expansion of global liquidity. Lavish succinctly posits:
“Seeing many bad takes on Bitcoin this morning, so perhaps we should return to first principles: Governments will keep overspending, global liquidity will keep expanding, and long-term, Bitcoin will reflect inflation that continues ad infinitum.”
Long-Term Thesis of Bitcoin: A Macro Perspective
The long-term viability of Bitcoin is increasingly insulated from short-term price volatility, anchored instead in enduring macroeconomic trends. Observations reveal a synchronous escalation in government debt and fiat currency debasement, rendering Bitcoin’s proposition more pertinent than ever.
The specter of fiscal irresponsibility looms large over major economies. For instance, the United States has reported a staggering budget deficit amounting to $1.775 trillion for fiscal year 2025, complemented by projected governmental expenditures exceeding $7.01 trillion by year-end. The implications of such financial mismanagement are profound and far-reaching.
Moreover, political figures, including former President Trump, have continued to advocate for extensive stimulus measures, exemplified by proposals advocating for direct monetary disbursements of $2,000 to households. This highlights the entrenched nature of elevated spending pressures as an integral component of American fiscal policy in 2025.
Global Liquidity Dynamics
The global liquidity landscape is undergoing a profound transformation, with broad money supply reaching an astonishing $142 trillion by September 2025—a staggering 446% increase since 2000. Key metrics indicate:
– Year-over-year growth accelerated to 7%, with a notable 9.1% surge observed thus far in 2025.
– China’s circulating money supply now stands at $47.1 trillion while the United States accounts for $22.2 trillion.
This unprecedented expansion is further exacerbated by central banks across developed markets which continue to inject liquidity into the financial system, thereby inflating the global monetary base to unprecedented levels. This sustained augmentation of liquidity has emerged as a defining characteristic of contemporary macroeconomic conditions.
Interestingly, this recent downturn has not deterred institutional investors; rather, it has galvanized their commitment to digital assets. For instance, Harvard University’s endowment fund remarkably tripled its holdings in Bitcoin ETFs during the third quarter of 2025, culminating in a substantial position valued at $443 million—an increase of 257%. This allocation now positions IBIT as Harvard’s preeminent investment choice ahead of traditional blue-chip assets. Such institutional fortitude amidst market volatility underscores a broader trend affirming Bitcoin’s long-term thesis.
Bitcoin as a Hedge Against Persistent Inflation
The ongoing implementation of expansionary fiscal policies and relentless deficit financing unequivocally underscores one salient reality: inflation is poised to perpetuate indefinitely. Consequently, Bitcoin’s intrinsic value proposition becomes increasingly robust with each increment in global money supply. As it surmounts the $140 trillion threshold amidst rampant currency printing by major economies, Bitcoin transcends its classification as merely a speculative instrument; it emerges as a vital hedge against perpetual currency debasement.
Despite recurrent negative commentary following each market dip, it is imperative to refocus on Bitcoin’s foundational principles. The interplay between soaring government deficits and relentless liquidity generation remains unchanged; governments will persist in overspending while global liquidity continues its inexorable expansion.
As articulated by Scott Melker from The Wolf of All Streets:
“If you believe that bitcoin price is going much higher over time, then it makes almost no difference whether you buy at 94k, 97k or 100k. You just buy.”
This perspective encapsulates the essence of long-term investment strategy within the realm of cryptocurrencies—one that emphasizes patience and conviction in the face of volatility.
