Bitcoin has seen its biggest weekly decline since August, with a 15% correction in the last 24 hours. Experts say this decline is due to global macroeconomic factors, and warn that Bitcoin could lose more value if these pressures increase. However, it is also stated that Bitcoin has internal factors that can offset these negative macroeconomic effects.
According to The Kobeissi Letter, Bitcoin’s price has historically shown a 10-week lagged correlation with the Global Money Supply (Global M2). In the last two months, Global M2 has fallen by $4.1 trillion, and if this trend continues, Bitcoin prices are expected to fall further. Global M2 is a key indicator that measures the total money supply in the global economy, which includes cash, demand deposits (M1), time deposits, and other liquid assets, and such fluctuations can affect both the stock and cryptocurrency markets.
The Kobeissi Letter made the following assessment: “In October, the global money supply hit a new record of $108.5 trillion, while Bitcoin prices rose to $108,000. However, in the last two months, the money supply has decreased by $4.1 trillion to $104.4 trillion. This is the lowest level since August. If this relationship holds, it suggests that Bitcoin prices could fall to $20,000 in the next few weeks.” A month ago, Joe Consorti, Head of Growth at Bitcoin custodian Theya, also warned of the possibility of a 20%-25% correction, and it appears that this prediction is starting to come true.
André Dragosch, Head of Research at Bitwise, notes that tightening liquidity in the United States will put pressure on Bitcoin, but he also points out that Bitcoin’s increasing illiquid supply could support its price by increasing Bitcoin’s scarcity.
“Bitcoin is currently balancing between a) macroeconomic pressures from the decline in US and global liquidity and b) on-chain effects from the strong BTC supply gap. Eventually, on-chain factors will likely overtake macro factors, but this could lead to some volatility and attractive buying opportunities in early 2025,” Dragosch commented.
At press time, Bitcoin is trading at around $94,000 and is down around 6% over the weekend, according to BeInCrypto data.