The US Federal Reserve Bank of New York published a 31-page report titled “The Bitcoin – Macro Disconnect”, analyzing the link between Bitcoin and macroeconomic fundamentals. The report states that Bitcoin is unresponsive to both monetary and macroeconomic news.
The report authored by Gianluca Benigno and Carlo Rosa noted, “This disconnect is puzzling as unexpected changes in discount rates should, in principle, affect the price of Bitcoin even when interpreting Bitcoin as a purely speculative asset.”
The bank modeled Bitcoin as an asset with no intrinsic value for which its current price depends on the discounted value of its future price.
Macro factors were separated into three areas in the report: news regarding the real economy and unemployment figures, monetary policy, and inflation information, such as the Consumer Price Index (CPI) and Producer Price Index (PPI).
The team then calculated how these would affect U.S. asset prices. The major finding is that, except for CPI, Bitcoin is orthogonal to every macro news that they considered.
“All other traditional assets respond to macroeconomic news with an economically large and significant coefficient,” the report stated.
The research determined that, unlike other US asset prices, Bitcoin is insensitive to unanticipated changes in the short-term rate, while its reaction to news regarding the future course of monetary policy is weak.
The experts specifically stated that they examined the price of Bitcoin between 2017 and 2022 about these macro factors. This is since beginning in 2017, Bitcoin entered a “more mature stage.”
“Given the short sample used in the analysis, however, more evidence is needed to assess the disconnect between Bitcoin and macroeconomic fundamentals,” the report concluded.
Also Read: Bitcoin Price Prediction 2023: Will Prices Surge or Slump?
