How the global economy influences Bitcoin
Bitcoin is independent from states and banks. But it is not isolated from global economic forces. Booms, crises, and political decisions all affect how much people use Bitcoin and how much they trust it.
Economic ups and downs
When the global economy is strong, many people have more spare capital. They invest part of it in different assets, including Bitcoin. In such phases, rising demand often leads to higher prices.
In a recession, liquid money becomes more important for daily life. People spend more on consumption and less on investments, which weakens demand for Bitcoin. Because Bitcoin is highly liquid and trades 24/7, investors often sell their Bitcoin first. At the same time, overall risk appetite changes during crises.
Market risk appetite
Investors often speak about “risk-on” and “risk-off”. When expected returns look attractive, capital moves into riskier assets like equities or Bitcoin, which many traditional investors still see as a risky asset. When the environment looks uncertain, many prefer more stable and less volatile assets such as government bonds or the US dollar.
Bitcoin is known for strong price swings and has been traded mainly as a risk asset. As the market matures, it could develop into a store of value (similar to gold), that is also in demand during risk-off periods.
When fiat loses value
Inflation exists worldwide, but with different intensity. Local currencies such as the dollar, euro, CHF, or lira regularly lose purchasing power when their money supply expands.
Bitcoin, by contrast, has a fixed limit of 21 million coins. This protects it from monetary inflation. In countries with high inflation or currency decline, such as Türkiye or Nigeria, many people use Bitcoin to protect their savings.
Policy and regulation
No state can control the Bitcoin network. But political rules do influence how people use it. Some countries try to restrict or ban Bitcoin to prevent capital flight from the local currency. Others create incentives, for example by approving Bitcoin ETFs or offering tax benefits.
This leads to very different levels of access - from barriers to open markets.
Bitcoin mining
The Bitcoin network runs only if miners provide computing power and energy. Shortages of electricity or hardware have a direct impact on network capacity, fees, and sometimes even on the price.
For example, a large power outage in China slowed confirmations for a while and pushed fees up. Climate, energy prices, and demand from other tech sectors also affect how costly and efficient mining is.
Final Thoughts
- Bitcoin reacts to business cycles, market risk appetite, and inflation.
- Political decisions can make usage harder or easier.
- Energy and hardware availability are crucial for the network.