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As Bitcoin hovers near $92,000, analysts question whether a significant price correction is imminent, influenced by its correlation with global money supply indicators.
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The speculation surrounds Bitcoin’s potential fall of 20%-25% based on historical trends linked to monetary policy and economic factors, sparking diverse opinions from experts.
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“So far, this correlation is shockingly accurate,” stated Joe Consorti, head of growth at Theya Bitcoin, highlighting the intricate relationship between Bitcoin and the M2 money supply.
Amidst predictions of a possible Bitcoin price correction, experts debate the coin’s correlation with global M2, raising questions about its future trajectory.
BTC may be in for a correction before $100,000
Joe Consorti suggests that Bitcoin’s ongoing relationship with M2 — which measures cash and short-term bank deposits — could lead to a significant pullback before potentially reaching the coveted $100,000 mark. “We’ll have to see if BTC follows it all the way down or stops short and finds support,” he explained, indicating that the cryptocurrency market is at a critical juncture.
The observed correlation spans a 70-day lag, with Consorti noting that the pattern has held since September 2023. This historical relationship showcases how BTC has mirrored shifts in the M2 money supply, particularly during times of economic uncertainty when inflation tends to soar, leading investors to pivot towards Bitcoin as a hedge.
Analyzing Bitcoin’s Historical Correlation with M2
The historical data supporting the BTC and M2 correlation indicates that during previous bull runs, an increase in M2 often foreshadowed escalating Bitcoin prices. This dynamic typically reflects heightened inflationary conditions, prompting investor behavior that favors digital assets. Macroeconomist Lyn Alden noted, “Bitcoin moves in the direction of global liquidity 83% of the time in any 12-month period,” underscoring the reliability of these trends.
However, contrasting views exist. Market commentator David Quintieri argues that Bitcoin’s inherent volatility makes it challenging to track against any financial metric. “All of these are just distractions. You could do it with the stock market, and it’s more realistic,” he remarked, suggesting that conventional stock indicators may provide clearer insights than tracking M2.
Trump policies may strengthen dollar
Adding another layer of complexity, some analysts point to potential policy changes with President-elect Donald Trump that could influence currency valuations. His proposed tariffs on imports are projected to strengthen the US dollar, which has historically placed downward pressure on higher-risk assets like Bitcoin. Hedge fund manager Scott Bessent noted in a Bloomberg interview, “Tariffs cause a stronger dollar,” remarking on the potential effects such fiscal measures could have on market dynamics.
As Bitcoin navigates this turbulent landscape, it is currently trading at around $91,988, close to its recent peak of $99,571 recorded on November 23. Observers will be keenly watching whether the cryptocurrency can break this psychological barrier or if impending economic factors will trigger a price correction.
Market Sentiment and Future Outlook
While some analysts view the weakening of the M2 supply as a negative signal for Bitcoin, others, like crypto commentator Sam KB, question the conventional narrative. He pointed out that historically, increases in M2 have coincided with Bitcoin rallying, adding context to the ongoing discussion around price trajectories. “M2 is nearly at the lowest point this cycle… but BTC is rallying. What am I missing?” he tweeted, highlighting the dissonance between traditional economic indicators and current market behaviors.
Conclusion
The landscape for Bitcoin remains multifaceted, with critical correlations to economic indicators such as global M2 and the potential impacts of poliсy shifts. As the cryptocurrency approaches significant price thresholds, investors are left to sift through contrasting analyses and forecasts. The consensus seems divided as to whether Bitcoin will undergo a correction or continue its ascent, making this a pivotal moment for enthusiasts and investors alike.
