The long-term theory of the crypto economy is based precisely on this reasoning. However, there is a distinction between the “short-term” and the “long-term” behind it. The whole thing works in two simple steps:
1. Why might BTC pump in the long term?
Money printing or dollar devaluation: War means billions of dollars in spending. When the U.S. government issues additional bonds to cover the cost of the war, or the Federal Reserve indirectly increases the money supply, the amount of dollars in circulation rises.
2. But what is happening in the short term?
Before a long-term pump, the market behaves in the opposite way at the start of a war.
Immediate panic (Risk-Off): At the first shock of war, people get scared and sell risky assets like crypto, wanting to move back into cash or dollars!!!!!
1. Why might BTC pump in the long term?
Money printing or dollar devaluation: War means billions of dollars in spending. When the U.S. government issues additional bonds to cover the cost of the war, or the Federal Reserve indirectly increases the money supply, the amount of dollars in circulation rises.
2. But what is happening in the short term?
Before a long-term pump, the market behaves in the opposite way at the start of a war.
Immediate panic (Risk-Off): At the first shock of war, people get scared and sell risky assets like crypto, wanting to move back into cash or dollars!!!!!