Nearly four years ago today, Bitcoin experienced a sharp drop from $19,500 to $16,200 in 2020, a decline of 17%, an event famously referred to as the "Thanksgiving Massacre." With the holiday approaching again, market participants are starting to question whether history will repeat itself.
On Monday and Tuesday, Bitcoin experienced an 8% pullback, dropping from $98,871 to a low of $90,791. This sudden decline sparked discussions among analysts about whether BTC prices would repeat history.
Will Bitcoin face a "Thanksgiving Massacre" in 2024?
Galaxy Digital's research director Alex Thorn compared the current market to the events of 2020 on X. "Who remembers the crash on Thanksgiving 2020? Between Wednesday, November 25, and Friday, November 27, 2020, Bitcoin crashed 17%. BTCUSD subsequently rose more than three times in the following 5 months. Will history repeat itself?"
The potential catalyst for a crash could be the global M2 money supply. Currently, a chart showing the correlation between Bitcoin and global M2 is circulating on X.
Theya analyst Joe Consorti observed that since September 2023, "Bitcoin has closely tracked global M2, lagging by about 70 days." In the past two months, global M2 has decreased from $108.3 trillion to $104.7 trillion, due to a stronger dollar (the depreciation of M2 denominated in foreign currencies when converted to dollars) and economic slowdown suppressing factors like loan and deposit creation.
Consorti warns that "if Bitcoin continues to follow the current M2 contraction trend, a pullback of 20-25% may occur, potentially bringing Bitcoin down to around $73,000 — this is not a price prediction, but a stark reminder of Bitcoin's linkage to global money supply." However, he also acknowledges that Bitcoin may go against the trend as it has in the past, especially "due to the FTX collapse and the subsequent loss of interest in the sector from 2022 to 2023."
He believes that structural ETF inflows and corporate buying pressure could help Bitcoin withstand the current M2 deflation. Consorti summarized, "In any case, it seems right to make adjustments at this time. As mentioned, the rapid rise in Bitcoin's price always has a mid-course pause, […] it is crucial to understand the assets you hold, the macro environment they are in, and the forces driving their long-term rise. If you truly understand Bitcoin, you wouldn't panic sell."
Despite the cautious outlook, some analysts believe this downturn may be short-lived. Real Vision's chief cryptocurrency analyst Jamie Coutts pointed out on X that "over the past month, Bitcoin buying has overshadowed the shadow of liquidity tightening." While acknowledging that Bitcoin seems to be "over-expanding compared to global M2," and that his liquidity model suggests caution, especially regarding leverage, Coutts emphasized the potential policy shifts that may benefit risk assets.
He cited economist Andreas Steno's view, noting that the Fed "is actually discussing bearish options for dollar liquidity — changes could come as early as December to support liquidity development." Coutts concluded, "The dollar index may have peaked. The lagging effects currently being discussed on Fintwit still exist, but ultimately the Fed is once again waving the bull flag for risk assets. Bullish on 2025. Bullish on BTC."
As of the time of publication, BTC is trading at $93,250.
