Bitcoin Faces Potential 25% Correction Amid Global M2 Decline

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As a seasoned crypto investor with a decade of experience under my belt, I find the correlation between Bitcoin’s price action and global M2 money supply fascinating. Having weathered numerous market cycles and witnessed the rise and fall of several altcoins, I can attest to the fact that Bitcoin remains the most resilient and reliable digital asset out there.

The behavior of Bitcoin‘s (BTC) price remains a point of interest among analysts, who are examining its connection with the worldwide growth of M2 money supply.

A notable projection suggests the pioneer cryptocurrency may be at the cusp of a 20–25% correction, aligning with a recent contraction in M2 liquidity.

Why Bitcoin May Be Due for a 25% Correction

Joseph Consorti, the growth leader at Bitcoin custody firm Theya, has pointed out that since September 2023, Bitcoin’s movement has closely mirrored the world’s M2 money supply with a delay of about 70 days. In a recent post on platform X (previously known as Twitter), Consorti issued a cautionary note about a possible 25% drop in BTC prices as it continues to align with global M2, suggesting potential market fluctuations based on this correlation.

Consorti pointed out that, without causing unnecessary worry, should the current pattern persist, there’s a possibility of Bitcoin seeing a decrease of around 20-25%.

Consorti’s study compares M2 data 70 days ahead with Bitcoin’s price, suggesting a concerning trend as worldwide liquidity decreases. This analysis is made against the backdrop of an unusual deviation from the historical correlation between M2 trends and Bitcoin prices.

He believes that previous discrepancies, like the one seen during the FTX crash in 2022, are due to unique occurrences within the market. Looking back, on September 30, Consorti forecasted that Bitcoin could reach $90,000 by the end of the year if it kept following M2 trends. This prediction turned out to be correct during Bitcoin’s recent surge, boosting his reputation for accuracy.

Supporter Joseph Scioscia emphasized once more that Bitcoin closely mirrors the patterns of M2 money supply growth. He recommended investors consider a long-term investment strategy known as dollar-cost-averaging (DCA), pointing out Bitcoin’s robust history.

“Bitcoin is the best proxy for M2 money supply. The trend in M2 reveals the potential direction in BTC, especially with Bitcoin’s approximate 70-day lag behind M2. DCA in Bitcoin and adopt a long-term strategy,” Scioscia stated.

As a researcher, I acknowledge that while some findings suggest patterns in Bitcoin’s behavior during specific timeframes, I myself harbor doubts about the comprehensive nature of these conclusions. A user identified as Spicez has raised valid concerns regarding the emphasis on short-term data. They posit that expanding the data scope to a five-year chart could potentially provide a more enlightening perspective on Bitcoin’s behavior during election cycles and post-halving periods, offering a broader understanding of its dynamics over time.

“It would be nice to see this chart for the last 5 years. It would give us an indication of BTC’s behavior towards M2 during the election cycle and how it behaved after the last halving. This 2-year chart doesn’t tell us much at all,” Spicez challenged.

Crucial Link Between M2 Money Supply and BTC

As an analyst, I’ve found that the M2 global supply serves as a crucial indicator of the overall liquidity within an economy. This encompasses not only checking and savings accounts but also other assets easily convertible to cash. Remarkably, this factor has significantly influenced Bitcoin’s price fluctuations.

Generally speaking, investments like Bitcoin tend to grow along with an increase in liquidity. The way Bitcoin’s value changes aligns closely with the expansion of M2 (a measure of money supply), reflecting overall market sentiments and economic circumstances.

An enlarged M2 growth suggests a relaxed monetary policy and a greater volume of money circulation, which typically stimulates risky investments such as cryptocurrencies. In the past, expansions in M2 have tended to coincide with Bitcoin’s bullish phases due to liquidity flowing into risk assets. On the flip side, contractions usually foreshadow corrections.

According to a recent analysis by BeInCrypto, the current global liquidity situation might propel Bitcoin’s value up to $100,000. As noted, events such as the 2024 Bitcoin halving and broader economic recoveries can serve as favorable conditions for Bitcoin’s price increase.

The rising interest in Bitcoin ETFs (exchange-traded funds), particularly from institutions like BlackRock, could counteract M2-related pressures. Structural buying from ETFs, coupled with corporate acquisitions, may provide a cushion against liquidity-driven sell-offs.

Consorti stated that Bitcoin might break its two-month trend of decreased M2 money supply expansion due to increased investments from structured ETFs and corporate purchases.

As the value of Bitcoin could encounter obstacles due to decreasing worldwide liquidity, opinions differ on its future direction. Long-term investment plans and increased structural inflows might help mitigate potential losses. Yet, traders ought to prepare for market fluctuations, as economic factors unfold over the coming days.

Currently, as I’m typing this, Bitcoin is being exchanged for approximately $94,395. According to BeInCrypto’s reports, it has experienced a decrease of around 3.37% since the trading session on Tuesday began.

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2024-11-26 08:50