Despite maintaining its position as the world’s largest cryptocurrency, Bitcoin’s recent price movements reflect a significant shift in the factors driving its performance. After years in which institutional adoption, developments within the digital asset industry, mining activity, and wallet innovations were the primary market catalysts, US monetary policy, interest rates, inflation, and global liquidity have emerged as the dominant forces shaping Bitcoin’s trajectory.
This shift has coincided with a sharp decline from Bitcoin’s all-time highs, raising fresh questions about its ability to regain upward momentum and whether it can still be regarded as “digital gold” or an effective hedge against inflation, particularly as global financial conditions continue to evolve and investor appetite for risk assets changes.
At the same time, artificial intelligence has become one of the most influential technological developments affecting financial markets, sparking debate over its potential impact on cryptocurrencies. AI could enhance trading infrastructure and blockchain efficiency while simultaneously introducing new cybersecurity risks that may reshape the digital asset landscape.
In exclusive interviews with Lana, Joshua Owen, Chief Executive Officer of Lunaro Financial Services UK, and Vijay Valecha, Chief Investment Officer at Century Financial, shared their views on the key forces driving Bitcoin, the outlook for the world’s largest cryptocurrency, and the impact of inflation, artificial intelligence, and monetary policy on the market.
What Is Driving Bitcoin
Joshua Owen said opinions remain divided over the primary forces behind Bitcoin’s price movements. Cryptocurrency supporters argue that the asset’s decline during a period of elevated interest rates demonstrates that Bitcoin has matured into an investment asset increasingly influenced by macroeconomic conditions. Others, however, believe tighter monetary policy has reduced retail investor liquidity, contributing to the gradual unwinding of what they describe as a speculative bubble after Bitcoin lost around 50% of its value from its record highs.
He added that Bitcoin, like most asset classes, is increasingly trading in line with inflation expectations and interest rate outlooks. Investors are now closely watching how the cryptocurrency performs during the next monetary easing cycle to determine whether it can re-establish itself as a compelling alternative investment.
Vijay Valecha, meanwhile, said Bitcoin slipped 0.5% to around $58,000 after investor confidence weakened following Strategy Inc.’s financing restructuring announcement. According to him, the move raised concerns that one of Bitcoin’s largest institutional buyers may no longer remain a sustainable source of demand.
He explained that the company’s disclosure that it may sell up to $1.25 billion worth of Bitcoin holdings to strengthen its cash reserves fundamentally changed investor expectations. Raising capital no longer necessarily implies purchasing more Bitcoin, but could instead be directed toward maintaining liquidity, repurchasing securities, or reinforcing the company’s balance sheet.
Valecha added that monetary policy has become a far more influential factor than developments within the cryptocurrency industry itself. While digital assets have historically benefited from lower interest rates, expectations of tighter monetary policy prompted investors to withdraw more than $4 billion from spot Bitcoin exchange-traded funds (ETFs) during June, marking the largest monthly outflow since the products were launched two years ago.
Can Bitcoin Regain Its Record Highs
According to Joshua Owen, Bitcoin’s decline from approximately $125,000 to around $60,000 has coincided with rising inflation expectations. He said investors are now watching closely to see whether Bitcoin’s behaviour changes once central banks begin cutting interest rates.
Owen noted that Bitcoin was originally created as a hedge against the traditional monetary system and the erosion of purchasing power caused by excessive money printing. However, as it has become more widely accepted as an investment asset, capital may increasingly flow into other non-yielding assets, particularly gold.
He added that while many investors consider Bitcoin to be “digital gold,” competition between the two assets within investment portfolios remains intense. One potential advantage for Bitcoin, he said, is the reduced opportunity for arbitrage compared with physical gold, which remains subject to transportation and logistics constraints. He stressed that a return to record highs would require a clear monetary easing cycle, accompanied by Bitcoin outperforming gold in attracting investment flows.
Vijay Valecha, on the other hand, noted that Bitcoin has fallen approximately 54% from its all-time high above $126,000. Recovering those losses would require a gain of roughly 115% from current levels, a move that would depend on powerful catalysts capable of triggering a broad-based buying rally—something he believes appears unlikely in the near term.
He added that Bitcoin has surrendered all of the gains it recorded following Donald Trump’s US election victory and is now trading below its post-election levels. The technical picture has also deteriorated after key support levels were broken.
Valecha further warned that Strategy’s plan to potentially sell around $1.25 billion worth of Bitcoin—equivalent to approximately 21,000 BTC—could add further selling pressure. Combined with ETF outflows exceeding $5.1 billion since the beginning of the year, he believes reclaiming previous record highs will remain difficult in the short term, although the longer-term outlook could improve if underlying market fundamentals change.
How Global Inflation Is Shaping Bitcoin’s Outlook
Joshua Owen said recent months have seen Bitcoin decline sharply alongside rising inflation expectations. He believes this pattern could reverse once inflation eases and interest rates begin to fall. Owen explained that Bitcoin was originally designed as a hedge against centralized monetary policies, and analysts will be closely watching whether the cryptocurrency rebounds during the next interest rate-cutting cycle. However, he cautioned that if Bitcoin continues to underperform despite monetary easing, it could raise broader questions about the asset’s long-term value proposition.
Vijay Valecha, meanwhile, said Bitcoin’s outlook depends not only on inflation but also on real interest rates, monetary policy, and overall market liquidity. He noted that persistently high inflation combined with hawkish monetary policy and elevated real yields would create strong headwinds for Bitcoin, pointing to the cryptocurrency’s nearly 60% decline following the Federal Reserve’s rate-hiking cycle that began in March 2022.
He added that lower interest rates generally support Bitcoin when they result from easing inflation and improving financial conditions rather than economic distress. As an example, he highlighted that Bitcoin nearly doubled in value during the year following the Federal Reserve’s decision to conclude its tightening cycle in September 2024.
Valecha stressed that monitoring global inflation trends remains essential, as persistent inflation leading to further monetary tightening would likely weigh on Bitcoin. Conversely, moderating inflation and lower interest rates could provide meaningful support. He also noted that Bitcoin’s role as a store of value could strengthen if confidence in fiat currencies or the traditional monetary system deteriorates, thanks to its limited supply and decentralized nature.
Artificial Intelligence and the Future of Cryptocurrencies
Joshua Owen said artificial intelligence could influence cryptocurrencies from two different perspectives. On one hand, advances in computing power could significantly reduce cryptocurrency mining times, raising questions about the value of the remaining mining rewards. On the other hand, the rapid adoption of AI technologies could increase threats to traditional banking systems, potentially reinforcing Bitcoin’s appeal as a hedge against centralized financial infrastructure.
He added that investors are also assessing the cybersecurity risks AI may pose to Bitcoin wallets, while debating whether investment in artificial intelligence could divert capital away from cryptocurrencies or accelerate their decline.
Vijay Valecha, however, believes artificial intelligence will serve as an important enabler for the cryptocurrency ecosystem rather than a direct long-term value driver for Bitcoin. He explained that AI’s greatest opportunities lie in strengthening cybersecurity, improving trading efficiency, enhancing blockchain analytics, advancing risk management, and automating regulatory compliance—all of which could boost institutional confidence and accelerate digital asset adoption.
At the same time, he warned that AI is a double-edged sword, as it could also facilitate increasingly sophisticated fraud, deepfakes, and financial crime unless accompanied by robust regulatory frameworks.
Valecha added that the convergence of artificial intelligence and blockchain technology is likely to accelerate innovation in areas such as smart contract auditing, fraud detection, decentralized finance (DeFi), and the tokenization of real-world assets. Nevertheless, he emphasized that Bitcoin will continue to be driven primarily by macroeconomic fundamentals—including monetary policy, market liquidity, and institutional capital flows—rather than by AI developments alone.
