Bitcoin Risks 25% Correction Amid Global Liquidity Squeeze: The M2-Bitcoin Correlation Chart Flashes A Warning Signal
Bitcoin’s price trajectory faces new headwinds as analysts warn of a potential 20–25% correction, driven by tightening global M2 money supply. Historically, BTC’s performance has closely mirrored changes in M2 liquidity, and a recent contraction in the metric suggests bearish implications for the cryptocurrency.
Crypto analyst Joe Consorti highlights Bitcoin’s approximate 70-day lag behind M2 trends, noting that liquidity tightening typically precedes market corrections. His latest analysis points to a potential 25% pullback if M2’s downward trend persists. The last notable divergence from this correlation occurred during the 2022 FTX collapse, underscoring how systemic events can override liquidity-driven trends.
Joseph Scioscia echoes the sentiment, reaffirming that Bitcoin’s price reliably aligns with global M2 movements. He advises investors to adopt a long-term dollar-cost-averaging (DCA) approach, leveraging Bitcoin’s historical resilience against liquidity-driven sell-offs.
Not all analysts agree. Critics like the X user "Spicez" argue that focusing on short-term charts ignores the broader picture, urging a five-year analysis to understand Bitcoin’s performance during major cycles, including halving events and election years.
The global M2 supply, which measures readily available liquidity in the economy, significantly impacts risk assets like Bitcoin. Rising M2 levels often indicate loose monetary policies and greater liquidity, fueling bullish crypto rallies. Conversely, contractions in M2 signal reduced liquidity, a bearish indicator for Bitcoin and other high-risk assets.
Despite this, structural inflows could offset M2-related pressures. Institutional interest in Bitcoin ETFs, particularly from major players like BlackRock, and corporate acquisitions may provide a buffer against liquidity-driven declines. Consorti adds that ETF inflows and corporate buying could help BTC buck the bearish trend.
