This article is from Jinse Finance, authored by Blockchain Knight.
$Bitcoin (BTC.CC)$ It has now become a real-time barometer of liquidity expectations, with oil prices being a key driver behind its price readjustments. This transmission effect becomes particularly evident when geopolitical crises trigger fluctuations in oil prices.
Oil prices impact inflation primarily through two channels: directly affecting the CPI by raising costs such as fuel and shipping; and psychologically, where heightened attention to gasoline prices reinforces inflation expectations, influencing central bank policy decisions and thereby altering the Federal Reserve’s interest rate cut trajectory.
The market adjusts its expectations of Federal Reserve policies based on changes in oil prices. If rising oil prices push up inflation, the market will delay the timing of the first rate cut and reduce the number of cuts. This repricing is quickly reflected in Treasury yields and the US dollar, both of which are core variables affecting Bitcoin liquidity.
As the discount rate for all assets, rising Treasury yields can lead to price adjustments in long-term risk assets like Bitcoin. A stronger US dollar tightens global financial conditions, further compressing liquidity.
For Bitcoin, macro volatility is amplified through the inherent leverage mechanisms of cryptocurrencies.
Currently, cryptocurrency price discovery mainly relies on perpetual futures, basis trading, and options hedging. When macro volatility intensifies, traders reduce their exposure, evidenced by fluctuations in funding rates, declining open interest, and frequent liquidations.
On March 2nd, tensions with Iran pushed up oil prices. Although Bitcoin experienced weekend selling pressure, it rebounded to the mid-60,000 range, primarily due to prior position adjustments and significant contraction of leveraged long positions.
February derivatives data also corroborates this point. Deribit showed increased demand for put options, while CME noted that changes in volatility and open interest reflected traders preparing for subsequent market hedging.
A decline in leverage is not a negative signal; rather, it implies that the market has regained tradability.
When open interest drops significantly, spot prices stabilize, and option skewness rises, it indicates that the market is reducing overall exposure. Buyers are seeking upside exposure while also focusing on risk hedging, which can suppress forced selling and lay the groundwork for future trends.
Essentially, oil is merely part of the macroeconomic backdrop, with its core role being to influence liquidity conditions by affecting inflation and Federal Reserve policies, ultimately impacting Bitcoin.
If oil prices fall, the market may restart expectations for rate cuts, providing liquidity support for Bitcoin. If oil prices remain high, persistent inflation concerns will tighten monetary policy, thereby constraining Bitcoin.
In short, the transmission chain of oil prices → inflation expectations → the Federal Reserve’s rate-cutting path → Treasury yields + the US dollar → liquidity environment → Bitcoin is the key factor.
As a globally traded indicator, changes in oil prices drive the market to reassess the cost of capital, while Bitcoin, positioned downstream in this repricing process, reflects in real-time the ultimate outcome of liquidity changes.
Editor/KOKO
