The Bitcoin rally is hitting a wall, and next month the numbers are lining up for a major correction. In October, the global money supply peaked at $108.5 trillion, pushing Bitcoin to a record high of $108,000. But here’s the unexpected twist: over the last two months, the money supply has shrunk by $4.1 trillion and now stands at $104.4 trillion—the lowest level since August. Historically, Bitcoin lags the money supply by about ten weeks. If this trend continues, prices could drop by as much as $20,000 within weeks of Donald Trump's inauguration. Analysts point to the current phase of Bitcoin as a mid-correction—a pattern seen previously in 2012, 2016, and 2020.
These phases led to monstrous bull runs, but first came the pain. And it seems that this could be vulnerable, especially considering forecasts that Bitcoin may drop by 30% even before the inauguration.
Panic sell-offs are sweeping the markets, and Bitcoin ETFs are bleeding.
Panic is spreading beyond cryptocurrencies. American stocks have just reported an outflow of $50.2 billion for the week ending December 18. This is the largest outflow since 2009. Large-cap funds lost $20.9 billion, erasing six weeks of gains.
Small, multi- and mid-cap funds have also not been spared, losing $5.4 billion, $3.9 billion, and $2.9 billion respectively. Meanwhile, the volatility index ($VIX) just reported the second largest daily spike in history. The market is on edge, and Bitcoin is at the center of events.
Long positions in Bitcoin were obliterated, causing prices to fall to $92,000 by mid-December. The exit provided bulls with a bit of respite: on Bitstamp, the price rose to $99,500. Coinbase buyers tried to push prices back to six figures, but institutional players, remaining on the sidelines, made the recovery shaky. Optimism didn't last long.
Bitcoin exchange-traded funds (ETFs) have also felt the heat. December 20 brought a net outflow from Bitcoin ETFs. iShares Bitcoin was hit the hardest. Investors are fleeing, and quickly.
