How Does the Uncertain History of Money Affect Bitcoin and the Crypto Market? A Detailed Look at the Transmission Channels

Understanding the "uncertain history of money" is not about discussing a distant chapter of financial history, but about answering a more practical question: when the form of money, the source of credit, and the settlement network are constantly changing, what role do Bitcoin and the crypto market actually play in the macro system? If Bitcoin is viewed only as "digital gold," it is easy to overlook the fact that in the short term it is still strongly influenced by liquidity and risk appetite; if it is viewed only as a "high-volatility tech asset," its long-term significance in monetary trust, cross-border settlement, and self-custody demand may be underestimated. Neither perspective is complete.

The reason monetary history is "indeterminate" is that money has never been a single object. It can be metal, banknotes, bank deposits, central bank reserves, government bond collateral, or even stablecoins and on-chain assets. In different stages, what the market cares about is not "which thing is naturally money," but who can provide credible accounting, final settlement, value storage, liquidity, and social acceptance. The macro transmission mechanism of the crypto market must also be understood from this multi-layer structure.

How macro variables change: money is not an isolated asset, but an institution and a balance sheet

When discussing macro variables, it is not enough to look only at a single statement such as "whether the central bank is easing." More accurately, macro variables change jointly through balance sheets, the yield curve, credit expansion, fiscal financing, and global capital flows.

In the traditional financial system, money has at least several layers: base money issued by the central bank, deposit money created by commercial banks, short-term funding instruments in the shadow banking system, high-quality collateral formed by government bonds, and U.S. dollar liquidity used in international trade and capital flows. These layers do not always expand or contract in sync. For example, expansion of a central bank balance sheet may increase system reserves, but whether commercial banks are willing to lend, whether the market is willing to take risk, and whether institutions need to deleverage will all affect the liquidity that ultimately reaches asset markets.

The crypto market occupies a special position in this system. On the one hand, Bitcoin is not issued by a central bank, its supply rules are relatively transparent, and on-chain settlement does not rely on the traditional banking ledger. On the other hand, most investors still use fiat money to buy Bitcoin, and the main trading pairs are priced in U.S. dollars or dollar stablecoins. In other words, Bitcoin has an externality in terms of technology and monetary narrative, but in price formation it is still embedded in the global dollar financial network.

This is also why the same story of "monetary uncertainty" can lead to different price reactions at different stages. When the market worries about the purchasing power of sovereign money, the scarcity narrative of Bitcoin may strengthen; when the market worries about a contraction in financial system liquidity, investors may sell high-volatility assets in exchange for cash or government bonds. Historical narratives provide the long-term framework, while macro variables determine short-term pressure.

Interest rates and liquidity channels: from discount rates and leverage costs to on-chain capital

Interest rates are one of the most direct channels connecting traditional macro conditions and the crypto market. Rising interest rates usually mean three things: the opportunity cost of cash and short-term debt rises, leverage financing costs rise, and the valuation tolerance of risk assets declines. Although Bitcoin does not have a cash-flow discount model like stocks, it is still affected by how much investors are willing to pay for a long-term narrative.

When short-term rates are relatively high, investors can earn a relatively clear return by holding cash, money market funds, or short-term Treasuries. By contrast, Bitcoin, ETH, and most crypto assets do not offer fixed income and have large price swings. At such times, some capital will demand a higher expected return before it is willing to take crypto risk, which suppresses valuation multiples or reduces new buying.

The liquidity channel is more complex than interest rates themselves. People often say that "loose liquidity is bullish for risk assets," but it is necessary to distinguish several types of liquidity:

• Central bank liquidity: reserves, asset purchases, refinancing, and other policy tools affect the fundamental funding conditions of the financial system.
• Market liquidity: bid-ask spreads and order book depth, and the balance sheet of market makers determine whether trades can be executed at low cost.
• Financing liquidity: whether investors can borrow funds at a reasonable cost and maintain margin and collateral.
• On-chain liquidity: stablecoin supply, DeFi lending pools, cross-chain bridges, and decentralized exchange depth affect capital turnover within crypto.

These liquidity conditions sometimes move in the same direction and sometimes diverge. For example, macro liquidity may appear to improve, but if exchange market makers reduce risk exposure, some tokens may still suffer from insufficient depth and amplified slippage. Conversely, growth in on-chain stablecoins may boost short-term trading activity, but if the cost of external dollar financing remains high, overall risk appetite may still be constrained.

One practical way to observe this is: do not look only at policy rates, but also at the "price of money" and the "availability of money." The price of money includes short-term rates, Treasury yields, and dollar funding costs; the availability of money includes net stablecoin issuance, exchange order book depth, perpetual futures funding rates, and DeFi lending utilization. Only when both improve at the same time is the liquidity environment in the crypto market more likely to be truly loose.

Risk appetite channel: why the same asset can switch between "safe haven" and "risk-on"

There is a common contradiction in Bitcoin’s narrative: sometimes it is called an anti-inflation, censorship-resistant, non-sovereign store of value, and sometimes it moves like a high-beta risk asset, in line with tech stocks. This is not necessarily a contradiction, but the result of different holders, different time horizons, and different macro shocks acting together.

In periods of rising risk appetite, investors are usually willing to chase growth, scarcity, and high-volatility returns. At such times, Bitcoin may show a higher correlation with stocks, especially high-growth technology sectors. Capital flows from cash and defensive assets into equities, crypto assets, risk bonds, and the more elastic parts of commodities. Within the crypto market, altcoins become more active, leverage rises, funding rates increase, and on-chain trading picks up.

In periods of declining risk appetite, investors may prioritize reducing volatility and leverage. Even if they remain bullish on Bitcoin’s scarcity over the long term, they may still sell in the short term because of margin pressure, fund redemptions, or a shrinking risk budget. This is especially true in the crypto market, where leveraged liquidations amplify price swings: price declines trigger forced liquidations, which further depress prices and lead to more collateral shortfalls. This mechanism is very similar to credit contraction in monetary history—when trust and collateral values fall at the same time, liquidity can suddenly disappear.

Therefore, determining whether Bitcoin currently behaves more like a "safe-haven asset" or a "risk asset" cannot rely on slogans alone, but must look at market structure. For example:

• If the rise is accompanied by genuine spot buying, declining exchange balances, and an increase in long-term holders, it may be closer to a store-of-value narrative.
• If the rise is mainly driven by highly leveraged perpetual futures, overheated funding rates, and a broad rally in altcoins, it may be closer to risk appetite expansion.
• If, under macro pressure, Bitcoin and stocks fall together while stablecoin demand rises, it suggests the market is returning to cash and liquidity first.

The U.S. dollar and capital flows: the crypto market still operates in a dollar-denominated system

No matter what the long-term vision for Bitcoin is, the real-world crypto market is highly dollarized. Mainstream trading pairs, stablecoins, institutional reports, risk models, and the profit-and-loss calculations of global investors are mostly based on the U.S. dollar. This makes the dollar cycle an important external variable for the crypto market.

A stronger dollar usually affects the crypto market through three channels. First, the cost for non-dollar investors to buy dollar-denominated assets rises, and marginal buying may decrease. Second, a stronger dollar often accompanies tighter global financing conditions, which is especially unfavorable to markets that rely on dollar debt or dollar liquidity. Third, the dollar cash itself becomes more attractive, and some capital shifts from high-volatility assets to dollar assets.

But the dollar channel is not one-way. For some regions with high local inflation, strict capital controls, or unstable payment systems, dollar stablecoins and Bitcoin may become alternative financial tools. In such cases, a stronger dollar may actually increase local demand for dollar-denominated on-chain assets. The difference lies in the fact that investment capital and usage capital have different motivations. The former cares about risk-return, while the latter cares about payments, value storage, and accessibility.

Stablecoins are the core carrier of the dollar channel in the crypto market. A stablecoin is not the same as a true bank deposit; it depends on issuer reserves, redemption mechanisms, custodian banks, the short-term bond market, and the regulatory framework. Expansion in stablecoin supply often means an increase in available on-chain dollar liquidity; stablecoin redemptions or de-peg risks may trigger market panic. For traders, watching total stablecoin supply, the secondary-market prices of major stablecoins, redemption channels, and reserve disclosures reflects the funding environment better than looking at the price of a single token.

Correlations with stocks, bonds, and commodities: Bitcoin’s position in a multi-asset portfolio

The crypto market is increasingly difficult to understand outside a multi-asset framework. Stocks, bonds, and commodities not only represent different asset classes, but also different market pricing of growth, inflation, credit, and liquidity.

The linkage with stocks mainly comes from risk appetite and liquidity. When tech stocks benefit from low rates, growth expectations, and expanding capital, Bitcoin may also benefit from a similar valuation environment. When the market reprices growth and rates, both may come under pressure at the same time. But this correlation is not a fixed constant; it changes with market narratives. For example, during periods of banking stress or sovereign credit concerns, Bitcoin may briefly detach from stock logic and be reinterpreted as a non-bank settlement asset.

The relationship with bonds is more subtle. Rising U.S. Treasury yields usually raise the global discount rate and attract capital into dollar fixed-income assets, putting pressure on risk assets. But if yields rise because of inflation expectations rather than real growth, market concerns about fiat purchasing power may also intensify, which can support certain hard-asset narratives. The key is to distinguish the combination of nominal rates, real rates, and inflation expectations, rather than simply assuming that "higher yields are always bearish."

The link with commodities is mainly reflected in inflation and scarcity narratives. Gold is often used as a comparison because it has long-term store-of-value characteristics, no credit liability, and a relatively limited supply. Bitcoin has narrative similarities to gold, but the market structure is very different: the gold market is larger and more mature, with relatively lower volatility and deeper participation from central banks and long-term institutions; Bitcoin is younger, trades around the clock, and has stronger leverage and sentiment swings. Therefore, Bitcoin can be included in the discussion of "hard assets," but it cannot be mechanically equated with gold.

There is another dimension of multi-asset correlation that is easy to overlook: the collateral chain. When stocks, bonds, or commodities swing sharply, institutions may need to add margin, adjust risk budgets, or sell more liquid assets. Bitcoin, as a 24-hour trading asset, may become one of the first assets to be sold or bought when traditional markets are closed. This gives it the characteristics of a "liquidity ATM" in the early stages of a crisis, rather than a stable safe haven.

Bitcoin and stablecoins: one is a scarce settlement asset, the other is an interface to dollar liquidity

Within the crypto market, Bitcoin and stablecoins represent two different monetary imaginations. Bitcoin emphasizes fixed supply, permissionless transfers, self-custody, and censorship resistance; stablecoins emphasize price stability, dollar denomination, payment efficiency, and on-chain liquidity. They are not simply competing with each other, but together form the base layer of crypto finance.

Bitcoin’s influence is mainly reflected in three aspects. First, it is the core collateral and benchmark asset of the crypto market, and price changes affect overall market risk appetite. Second, it provides a case study of non-sovereign digital scarcity, allowing the market to discuss a monetary network that does not rely on a central issuer. Third, its price cycle affects the behavior of miners, holders, institutional products, and the on-chain ecosystem.

The influence of stablecoins is closer to a "crypto dollar banking system." Traders use stablecoins to quote, settle, collateralize, and move funds across platforms. DeFi protocols use stablecoins to build lending, market making, and yield strategies. Cross-border users use stablecoins to bypass traditional payment frictions. The growth of stablecoins can improve trading efficiency in the crypto market, but it also brings reserve transparency, redemption run risk, issuer concentration, smart contract, and regulatory compliance risks.

A concrete scenario can illustrate the difference between the two: suppose global risk assets fall and investors worry about tightening liquidity. In the short term, Bitcoin may decline because of deleveraging, while stablecoin demand may rise because traders switch positions into on-chain cash. If the market then becomes concerned about the banking system or local currency credit, some capital may further shift from stablecoins into Bitcoin to reduce dependence on issuers and the banking custody chain. In other words, within the same macro shock, stablecoins may first reflect "cash demand," while Bitcoin later reflects "credit substitution demand," with different reaction order and magnitude.

Short-term versus long-term differences: narratives can last, but prices are still disrupted by cycles

The uncertainty of monetary history gives Bitcoin a long-term discussion space: if the form of money changes with technology, politics, and credit structures, then a global, open, transparent-supply, self-custodial digital asset has a reason to exist. But a long-term reason does not equal a short-term price path.

In the short term, crypto asset prices are often determined by marginal capital, leverage, sentiment, and market structure. A one-day or one-week move may come more from exchange liquidations, ETF or fund flows, market-maker risk limits, or macro data surprises than from deep changes in the monetary system. Using a long-term narrative for short-term trading can easily overlook execution risk.

In the medium term, the interest-rate cycle, dollar liquidity, regulatory expectations, and industry adoption jointly affect the valuation range. If real rates remain high, dollar funding tight, and risk asset valuations under pressure, the crypto market may face valuation compression even if technological progress continues. Conversely, if liquidity improves, stablecoin supply grows, and institutional channels expand, the market may be more willing to price in the long-term narrative.

In the long term, the core question is whether Bitcoin and crypto networks can continue to provide unique functions: credible scarcity, censorship-resistant transfer, self-custody, secure settlement, composable finance, and global accessibility. If these functions are continuously validated in real-world demand, they may move from narrative to more stable network value. If users mainly rely on centralized trading, leveraged speculation, and short-term hype, the long-term monetary narrative will be weakened.

A practical checklist: how to observe whether transmission is happening

Investors can use the following checklist to translate abstract macro transmission into observable indicators. It is not a trading signal, nor can it guarantee returns; it simply helps identify changes in the environment.

When using this framework, two misunderstandings should be avoided. First, do not absolutize a single indicator. For example, rising stablecoin supply may represent new capital entering, or it may simply be internal transfers; high funding rates may indicate a strong trend, or they may indicate a crowded trade. Second, do not ignore time horizons. The impact of macro variables usually lags, while on-chain leverage can react very quickly.

A more robust approach is to look for resonance across multiple indicators: if real rates decline, the dollar weakens, stablecoin supply recovers, spot trading increases, and leverage is not overheated, then the risk environment may be relatively friendly; if the dollar strengthens, yields rise, stablecoins are redeemed, and funding rates remain extreme, the market may be in a fragile state.

Conclusion: monetary history provides the sense of the problem, while transmission mechanisms define the investment boundary

The real importance of "the uncertain history of money" is that it breaks the singular imagination of money. Money can be a commodity, credit, sovereign liability, bank deposit, or digital asset in an open network. Bitcoin and the crypto market emerged precisely in this historical uncertainty: they both respond to demand for fiat credit trust, cross-border payments, and self-custody, and are inevitably affected by dollar liquidity, the interest-rate cycle, and risk appetite.

Therefore, understanding the crypto market cannot rely on a single narrative. In the long run, discussions of Bitcoin’s value cannot be separated from the monetary system, scarcity, settlement security, and network adoption; in the short run, price volatility cannot be separated from interest rates, the dollar, leverage, stablecoin liquidity, and cross-asset correlations. Stablecoins further show that the crypto market is not completely detached from traditional finance, but has, to a large extent, brought dollar liquidity on-chain.

The boundaries of this framework are also clear: it is suitable for understanding the macro environment, identifying sources of risk, and decomposing market narratives, but not for being treated as a deterministic model for predicting prices. Monetary history is full of path dependence and institutional change, and the crypto market itself is highly volatile, heavily leveraged, and regulatory uncertain. Any analytical tool can only improve the quality of the question; it cannot eliminate market risk.

References

1. The Indeterminate History of Money：https://trezor.io/blog/insights/the-indeterminate-history-of-money
2. Bitcoin: A Peer-to-Peer Electronic Cash System：https://bitcoin.org/bitcoin.pdf
3. Federal Reserve - Monetary Policy：https://www.federalreserve.gov/monetarypolicy.htm
4. Bank for International Settlements - The future monetary system：https://www.bis.org/publ/arpdf/ar2022e3.htm
5. International Monetary Fund - Global Financial Stability Report：https://www.imf.org/en/Publications/GFSR
6. OneKey Blog：https://onekey.so/blog/

Risk Disclosure

This article is for educational and informational purposes only and does not constitute investment advice, financial advice, legal advice, or tax advice. Bitcoin, stablecoins, and other crypto assets involve significant market risk, and prices may fluctuate sharply due to macro data, interest-rate changes, dollar liquidity, risk appetite, regulatory policies, exchange events, or on-chain security incidents. The crypto market may also face execution risk and liquidity risk, including insufficient order book depth, widened slippage, trading interruptions, cross-chain bridge failures, and inability to execute trades in time during extreme market conditions. When using centralized platforms or stablecoins, there are custody, reserve, redemption, and counterparty risks; when using self-custody and DeFi, there are risks of private key loss, smart contract vulnerabilities, oracle anomalies, and operational mistakes. Leveraged trading amplifies gains and losses and may result in forced liquidation or even the complete loss of principal. Different jurisdictions have different regulatory requirements for crypto assets, stablecoins, security status, taxation, and cross-border payments; relevant rules may change, and you should conduct independent research based on your own circumstances and consult professionals before participating.