Bitcoin Analyst Predicts 25% Price Drop Following Correlation With M2 Money Supply Indicator. Should Investors Be Cautious?
According to analysis by Joe Consorti, Head of Grow at Theya Bitcoin and Bitcoin analyst, there is a possibility of a 20-25% drop in Bitcoin price if the digital currency continues to maintain its correlation with the M2 money supply indicator. In a post on X on November 26, Consorti said that if Bitcoin continues to follow its long-term correlation with the global money supply and bank deposits, the price could drop to $70,000. According to him, this correlation has been quite accurate so far, so it is important to continue to monitor whether BTC will continue to decline or stop and find support.
From further analysis, Consorti stated in a post on X the day before that since September 2023, Bitcoin has been following the global M2 indicator (an estimate of short-term cash and bank deposits) with a lag of about 70 days. Historical observations have shown that the M2 money supply and its growth have been correlated with previous Bitcoin bull periods. In general, Bitcoin prices tend to rise in tandem with increases in the M2 money supply as rising M2 usually signals inflationary pressures, prompting investors to seek riskier assets like Bitcoin as a hedge against inflation.
However, Consorti added, “I don’t want to alarm anyone, but if this situation continues, we could see a 20-25% pullback in Bitcoin.” This suggests that while there is potential for gains, investors should also be aware of the potential for significant downside risks. This underscores the importance of understanding the correlation between global economic indicators and the cryptocurrency market in order to make informed investment decisions.
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