A recent analysis by financial commentator Fejau suggests that a loosening of financial conditions could be a significant tailwind for Bitcoin. The Chicago Fed’s National Financial Conditions Index (NFCI) has been steadily declining, indicating a more accommodative environment for risk assets.
Fejau’s analysis, shared on X, highlights the historical correlation between the NFCI and Bitcoin’s price. In periods of looser financial conditions, when liquidity is more readily available, Bitcoin has tended to outperform. This pattern was evident in 2013, 2017-2018, and more recently, as Bitcoin’s price surged from $25,000 to over $73,000 in March 2024, coinciding with a decline in the NFCI.
While other factors, such as the DXY index, can influence Bitcoin’s price, the negative correlation with the NFCI suggests that a continued easing of financial conditions could provide a favorable backdrop for the cryptocurrency. As global central banks continue to adjust monetary policies, investors may be well-advised to keep an eye on the NFCI and its implications for Bitcoin.
