Key Points
- Bitcoin’s price has surged, testing the 20-day EMA ($85,703) as support.
- Bitcoin’s correlation with the M2 money supply could potentially drive its price upwards.
Bitcoin, the leading digital asset, has shown a bullish trend in the last 24 hours, surging by 3.66% and hitting a daily high of $87,443.27.
The asset has also regained the significant 20-day EMA ($85,703) and is currently testing this level as support, as CoinMarketCap shows.
Bitcoin at a Critical Juncture
Fibonacci retracement levels indicate key resistance areas, with the 1.618 level at $85,939 acting as a pivotal point.
If Bitcoin can maintain above this level, the next targets would be the 2.618 ($88,023), 3.618 ($90,107), and 4.236 ($91,395) extensions.
However, the MACD indicator suggests that bullish momentum may be slowing down, as histogram bars have started shrinking.
If Bitcoin faces rejection at these resistance zones, a pullback to the 0.618 ($83,858) or 0.786 ($84,205) Fibonacci levels could be possible before the next upward movement.
Bitcoin’s Relationship with M2 Money Supply
One of the key reasons Bitcoin may continue to rise is its relationship with the M2 money supply.
The M2 money supply includes the total amount of money in circulation, such as cash, checking deposits, and easily accessible savings.
Historically, Bitcoin price has shown a strong correlation with the expansion of M2.
The theory is that as more liquidity is injected into the economy, the value of scarce assets like Bitcoin tends to rise at an accelerated rate.
Due to this correlation, even a modest 10% increase in M2 liquidity could potentially more than double Bitcoin’s price.
This effect is due to a phenomenon known as power-law leverage, which means that Bitcoin’s price reacts disproportionately to changes in available liquidity.
Arthur Hayes believes that Bitcoin’s recent drop to $77,000 may have marked a bottom.
He attributes the potential for renewed bullish momentum to the conclusion of quantitative tightening (QT) by April 1 and the possibility of renewed quantitative easing (QE) or exemptions to the Supplementary Leverage Ratio (SLR).
Meanwhile, Michael Saylor remains steadfastly bullish, claiming that investors only have a couple of days left to buy Bitcoin under $100,000, and “then you will never see five-figure Bitcoin again”.
Pakistan and Arizona’s Pro-Bitcoin Stance
In addition, Pakistan is preparing to legalize cryptocurrency trading.
The country is set to introduce a regulatory framework to bring clarity to crypto-related activities.
Similarly, the Arizona House of Representatives’ Commerce Committee has approved the Bitcoin Reserve Bill (SB1373) in a narrow 6-to-4 vote.
Sponsored by Republican Senator Mark Finchem, the bill aims to establish a “Digital Assets Strategic Reserve Fund” to be managed by the state treasurer.
The fund would consist of legislative allocations and any cryptocurrency assets seized by the state.
