Key Points
- Bitcoin’s price may decrease by 20% or more if its correlation with the global M2 money supply continues.
- Analysts have differing views on Bitcoin’s connection with the M2 money supply and its potential impact on the cryptocurrency’s price.
Bitcoin’s chances of hitting new price highs could be hindered by a significant hurdle. Analysts predict a decrease of 20% or more if its established correlation with the global M2 money supply continues. The M2 money supply, which includes cash and short-term deposits, has historically been a key indicator of Bitcoin’s price trends. Joe Consorti, head of growth at Theya Bitcoin, anticipates a price pullback to $70,000 if this pattern persists.
Bitcoin and M2 Money Supply Correlation
Consorti issued a warning on social media platform X, emphasizing the remarkable accuracy of this correlation. He expressed uncertainty about whether Bitcoin would follow the M2 supply’s path all the way down or find support before reaching that point. Since September 2023, Bitcoin has shown a 70-day delay in reflecting the global M2 money supply movement.
Historically, Bitcoin’s value has risen with the global M2 money supply, especially during inflationary periods. An expanding M2 often signals inflation, leading investors to consider Bitcoin as a hedge against rising prices. Similar patterns were observed during previous bull runs. However, analyst Joe Consorti expects a 20-25% drop in Bitcoin’s value, attributing this prediction to ongoing trends that could potentially lead to significant declines.
On November 25, 2024, Consorti highlighted Bitcoin’s tendency to follow M2 movements with a 70-day delay. He has observed this correlation consistently since mid-2023, highlighting its importance for market analysis. He warned of potential corrections if the trend continues, noting the historical reliability of this relationship.
Different Perspectives on Bitcoin and M2 Money Supply Correlation
Experts offer contrasting perspectives. Macroeconomist Lyn Alden noted in a September 2024 report that Bitcoin aligns with global liquidity trends 83% of the time over a 12-month period, moving alongside M2. Despite this observation, some commentators remain skeptical. Analyst David Quintieri dismissed such correlations, emphasizing Bitcoin’s extreme volatility, which he argued undermines its connection to any metric.
Meanwhile, Glassnode’s lead analyst, James Check, offered a different perspective, explaining that much of the recent decline in M2 was due to dollar strength, effectively “devaluing” the M2 of other countries.
Analysts express concerns about external influences, such as potential US tariff changes, affecting Bitcoin. On November 22, crypto analyst Sam KB highlighted a notable anomaly in market behavior. Historically, Bitcoin rallies have aligned with peaks in M2 money supply. However, during the current cycle, despite M2 reaching its lowest level, Bitcoin continues to surge.
Adding to the uncertainty, President-elect Donald Trump’s plans to impose tariffs on imported goods could further strengthen the US dollar. Hedge fund manager Scott Bessent addressed this issue in a Bloomberg interview on November 5, pointing out that “Tariffs cause a stronger dollar,” which could lead to challenges for Bitcoin.
