Bitcoin (BTC) could return to the $70,000 mark if it continues to maintain its correlation with global money supply, including cash and bank deposits, according to an analyst.
“So far, this correlation has been incredibly accurate,” Joe Consorti, head of development at Theya Bitcoin, stated in a post on X on November 26.
BTC may correct before reaching $100,000
“We will need to wait and see if BTC reverses into a downtrend or halts and finds support,” Consorti added.
Correlation chart between Bitcoin and M2 money supply | Source: X/Joe Consorti
Earlier, in a post on X on November 25, Consorti noted that Bitcoin has closely followed global M2 money supply – including cash and short-term deposits – with a lag of about 70 days since September 2023.
The M2 money supply and its historical growth have been linked to Bitcoin's price rallies.
Bitcoin's price often rises in parallel with M2 money supply, as increases in M2 typically signal inflationary pressures, prompting investors to seek out risk assets like Bitcoin to preserve value against inflation.
“I don't want to cause alarm, but if this trend continues, Bitcoin could face a correction of 20-25%,” Consorti emphasized.
Correlation with global liquidity
Economist Lyn Alden stated in a September 2024 report that Bitcoin moves in the direction of M2 83% of the time in any 12-month period.
Lyn Alden points out that Bitcoin's correlation with M2 is higher than any other asset class | Source: Lyn Alden
However, not all analysts agree with Consorti's forecast.
Market commentator David Quintieri wrote: “Bitcoin is too volatile to be compared to anything.”
“All of this is just a distraction. You can do the same with the stock market, and the results will be more realistic,” he added.
Meanwhile, James Check, head of analysis at Glassnode, believes: “Most of this M2 decline is due to the strength of the dollar, right? This is basically ‘diminishing the value’ of M2 in regions outside the U.S. (ROW).”
Cryptocurrency commentator Sam KB posted on X on November 22:
“Every time M2 peaks, BTC does too... except this cycle.
M2 is currently at its lowest in this cycle… but BTC is rising. What am I missing?”
Trump's policies could make the dollar stronger
Some analysts warn that President-elect Donald Trump's plan to impose tariffs on imports could increase the value of the U.S. dollar — a trend that has previously put pressure on risk assets like Bitcoin.
In an interview with Bloomberg on November 5, hedge fund manager Scott Bessent commented: “Tariffs are making the dollar stronger.”
“A weakening dollar alongside tariffs is unusual in economics,” he added.
At the time of writing, Bitcoin is trading at $93,488, just days after nearly reaching the $100,000 mark. The current all-time high for Bitcoin is $99,571, achieved on November 23.