Central Bank printing money vs crypto world rise and fall: How monetary policy can leverage the crypto market

What is monetary policy? In simple terms, it is the trick of the Central Bank to adjust interest rates, print money, or withdraw money.

The Central Bank mainly has two sets of operations:

• Monetary Easing (Loose Policy): Lower Interest Rate + Increase in Money Supply → More Money, Cheaper Borrowing → People Have Extra Money to Invest → Including Buying coins
• Tightening (Contraction Policy): Interest Rate Hike + Withdrawal of Money → Less Money, Borrowing Becomes Expensive → People Become Cautious → Investment Demand Decreases

What does this have to do with the coin circle?

When the Central Bank injects liquidity, there is ample liquidity in the market, and both retail investors and institutions have idle money looking for opportunities. Risk assets like Bitcoin and Ethereum become the “new favorites,” with funds pouring in and driving up coin prices. A typical example is the massive quantitative easing by the Federal Reserve after the 2008 financial crisis, resulting in Bitcoin rising from a few cents to several thousand dollars.

Conversely, when the Central Bank tightens monetary policy (for example, during the aggressive interest rate hikes by the Federal Reserve that year), interest rates soar, and the yields on traditional financial products increase, leading everyone to be less eager to chase after high-risk coins. At this time, coin prices are likely to come under pressure.

Core Logic: Policy currency affects “disposable income” → determines how much spare money flows into the cryptocurrency market → directly impacts coin price trends. Therefore, paying attention to Central Bank trends is more important than looking at candlestick charts.

Further Reading: The Difference Between Fiscal Policy and Monetary Policy, Historical Extreme Cases (Hyperinflation in Venezuela), The Past and Present of Quantitative Easing