Bitcoin (BTC) is signaling a significant downward trend, closely tied to global money supply (M2). Some analysts predict that BTC’s price could plummet by up to 80%, potentially hitting $20,000 within weeks. This could pose a major challenge to Bitcoin’s path toward six-figure valuations.
The Correlation Between Bitcoin and Money Supply
Historically, Bitcoin prices have shown a strong connection to global money supply (M2) trends. According to The Kobeissi Letter, this correlation typically manifests with a 10-week delay. For instance, in October, the global money supply peaked at $108.5 trillion but fell to $104.4 trillion in December, the lowest level since August. This decline coincided with a downturn in Bitcoin’s price.
The Kobeissi Letter foresees a significant BTC price correction, emphasizing the critical role of this correlation in understanding Bitcoin’s price movements. They stated:
“If liquidity continues to shrink, Bitcoin prices may face substantial pressure, possibly leading to a sharp correction.”
Potential Outcomes of the Correlation
Joe Consorti highlights two possible scenarios regarding Bitcoin’s link to global money supply. In the first, Bitcoin decouples from the correlation due to high demand within its ecosystem, resulting in an independent rally. Alternatively, if liquidity remains tight, a major correction is likely.
Jamie Coutts also underscores the impact of money supply on Bitcoin. Coutts projects that global money supply could reach $127 trillion by 2025. He suggests Bitcoin could capture 10% of this new liquidity, leading to significant growth. While this scenario presents substantial opportunities, it also entails risks for BTC investors.
Diverging Market Dynamics and Alternative Views
Some analysts argue that the relationship between money supply and Bitcoin is losing relevance. CryptoAnarchyst, for example, notes that the market is now more influenced by institutional investors and ETFs. As a result, traditional liquidity metrics may no longer be as predictive as before.
Global money supply remains a crucial indicator of overall liquidity in the economy. Historically, increased liquidity has driven investors toward riskier assets. Conversely, during periods of liquidity contraction, assets like Bitcoin often trend downward. This dynamic continues to play a key role in Bitcoin’s market behavior.
Bitcoin’s Technical Outlook
From a technical perspective, Bitcoin demonstrates both short- and long-term bullish potential. Currently trading above its 50-day simple moving average (SMA) at $91,748 and its 200-day SMA at $70,040, BTC shows resilience. Key support lies at $95,000, while $100,000 serves as a critical resistance level. Breaking these levels could pave the way for new all-time highs.
The Bit Journal will keep monitoring these developments, offering detailed insights into Bitcoin’s market trends and its evolving relationship with global liquidity.
https://twitter.com/Thebitjournal_
https://www.linkedin.com/company/the-bit-journal/
https://t.me/thebitjournal
Follow us on Twitter and LinkedIn and join our Telegram channel to get instant updates on breaking news!
