Bitcoin (BTC) price action remains under focus as analysts consider its correlation with the global M2 money supply.
One projection suggests the cryptocurrency could be on the verge of a 20–25% correction, aligning with a recent contraction in M2 liquidity.
Why Bitcoin Could Be About a 25% Correction?
Bitcoin custodian firm Theya's head of growth, Joe Consorti, highlighted Bitcoin's close tracking of global M2 with a lag of approximately 70 days from September 2023. In a recent post on X (formerly Twitter), Consorti warned about a possible BTC pullback by 25% as it continues to track global M2,
I don't want to alarm anyone, but if this trend continues, Bitcoin could experience a 20-25% correction, Consorti said.
Their analysis puts M2 data 70 days ahead compared to the price of Bitcoin, revealing a worrying trajectory as global liquidity tightens. Consorti's remarks come amid a rare takeoff of the M2 trend, which has historically aligned with Bitcoin prices.
Bitcoin (orange) correlation with Global M2 (white). Source: X/Twitter
He attributes past divergences, such as during the FTX crash in 2022, to specific market events. In fact, on September 30, Consorti predicted that Bitcoin could hit $90,000 by the end of the year if it continued to mirror M2 trends. That prediction came true during BTC’s recent rally, bolstering his credibility.
Another proponent of this correlation, user Joseph Scioscia, reiterated that Bitcoin acts as a reliable proxy for trends in the M2 money supply. He advised investors to adopt a long-term dollar-cost averaging (DCA) strategy, citing BTC’s historical resilience.
Bitcoin is the best proxy for M2 money supply. The trend in M2 reveals BTC’s potential direction, especially with Bitcoin’s approximate 70-day lag behind M2. DCA Bitcoin and adopt a long-term strategy, Scioscia said.
However, skepticism remains. An X user known as Spicez criticized the focus on short-term data. They argue that a broader five-year chart would offer more insights into Bitcoin’s behavior during election cycles and post-halving periods.
It would be nice to see this chart for the last 5 years. It would give us an indication of how BTC behaved relative to M2 during the election cycle and how it behaved after the last halving. This 2-year chart doesn’t tell us much, Spicez challenged.
Crucial link between M2 money supply and BTC
The M2 global supply measures the total liquidity in the economy, including checking accounts, savings accounts, and other liquid assets that can be quickly converted into cash. It has been a key driver of Bitcoin’s price movements.
Risk assets, including Bitcoin, typically correlate with increased liquidity. The relationship between Bitcoin price and M2 expansion reflects market sentiment and broader economic conditions.
A higher M2 expansion indicates loose monetary policy and an increase in the money supply, which often boosts risk assets like cryptocurrencies. Historically, increases in M2 correspond to bullish trends for Bitcoin as liquidity flows into risk assets. Conversely, declines usually signal impending corrections.
In a recent analysis, BeInCrypto echoed this call, suggesting that global liquidity could help Bitcoin reach $100,000. As reported, factors such as the 2024 Bitcoin halving and broader macroeconomic recoveries often act as tailwinds for BTC’s price.
Interest in ETF is counterpoint
However, growing interest in Bitcoin ETFs (exchange-traded funds), particularly from institutions like BlackRock, may counter M2-related pressures. Therefore, structural ETF purchases, coupled with corporate acquisitions, may provide a buffer against liquidity-driven selloffs.
“Bitcoin could buck this 2-month period of M2 deflation thanks to structural ETF inflows + corporate buying pressure,” Consorti added.
As Bitcoin price faces potential headwinds due to reduced global liquidity, the market remains divided on its next move. As such, structural inflows and long-term adoption strategies could mitigate any downside. However, traders should brace for volatility as macroeconomic factors unfold this week.
BTC Price Performance. Source: BeInCrypto
At the time of writing, Bitcoin is trading at $94,395. Additionally, data from BeInCrypto shows that it has fallen 3.37% since the opening of Tuesday's session (26).
The article Bitcoin (BTC) Forecast: 25% Correction in Sight? appeared first on BeInCrypto.
