- Analysts are anticipating a potential rise in Bitcoin due to an unusual increase in the US money supply.
- Conversely, there has been a significant increase in short positions against Bitcoin, suggesting potential price instability.
- This dual narrative has investors and analysts on edge, as both outcomes remain plausible in the near term.
Bitcoin’s potential rally amidst increasing US money supply and rising short positions could signal a dramatic market shift.
Bitcoin’s trajectory ahead
Noted entrepreneur and crypto analyst, TechDev_52, has suggested that Bitcoin could see a dramatic surge following a record high in BTC vs. M1 liquidity.
‘Bitcoin was unexpectedly prevented from reaching new highs in 2021 despite a huge increase in M1 liquidity. Now that it has surpassed its 2M supertrend, a significant upward movement seems imminent.’
TechDev_52 attributed the lack of a major rally in 2021 to an extraordinary increase in M1 liquidity during the COVID-19 pandemic, which didn’t translate to Bitcoin price gains as expected.
For clarity, M1 encompasses the most liquid forms of money, such as cash and assets that can be quickly turned into cash. M2 includes these as well as less liquid forms like savings deposits.
Meanwhile, crypto market analyst Willy Woo highlighted a 0.7% increase in M2. Historically, increases in the money supply have correlated with rises in Bitcoin’s USD value.
While these indicators suggest a potential upward trend for Bitcoin, it remains uncertain whether the cryptocurrency will breach its current range.
New data indicates that leveraged funds are currently holding record BTC short positions, possibly as a risk management strategy against price corrections.
In the short term, a move towards $70.5K is possible after sweeping the liquidity at $68.4K, according to data from Coinglass. These levels are critical points and could influence price action significantly.
Conclusion
Bitcoin is currently at a pivotal point, with the increasing US money supply and rising short positions painting a complex market picture. Investors should remain vigilant, balancing optimism about potential rallies with caution regarding possible corrections.
