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Bitcoin’s recent price trajectory has sparked debate among analysts, with some warning of a potential 20% correction. According to Joe Consorti, head of growth at Theya Bitcoin, the cryptocurrency’s price closely mirrors the global M2 money supply — a measure of cash and short-term bank deposits — with a notable 70-day lag.
If this trend holds, Bitcoin’s price could retrace to approximately $70,000 before regaining momentum. However, not all market observers agree with this outlook.
Bitcoin’s Correlation with M2 Money Supply
Historically, Bitcoin’s price has shown a strong correlation with the global M2 money supply. The relationship has been particularly evident during previous bull runs, as increases in M2 typically signal inflationary pressures. In such environments, investors often turn to riskier assets like Bitcoin to hedge against inflation.
Consorti shared his analysis on Nov. 26, highlighting that Bitcoin has followed global M2 trends since September 2023. He cautioned, “If this correlation persists, Bitcoin could be in for a 20-25% correction.”
Diverging Analyst Opinions
While Consorti’s analysis has gained attention, not all experts share his outlook.
Skeptics Question the Correlation
Market commentator David Quintieri dismissed the notion, stating, “Bitcoin is too volatile to track it against anything. You could do it with the stock market, and it’s more realistic.”
Crypto analyst Sam KB added skepticism, noting in a Nov. 22 post that despite M2 reaching a cyclical low, Bitcoin continues to rally. “What am I missing?” he asked, challenging the assumption of a direct link between Bitcoin’s price and M2 trends.
Macroeconomic Context
Other analysts have pointed to macroeconomic factors affecting M2. Glassnode’s lead analyst, James Check, argued that much of the decline in M2 stems from a strengthening US dollar, which effectively reduces the value of M2 in other regions.
Macroeconomist Lyn Alden, in a September 2024 report, highlighted Bitcoin’s strong historical alignment with global liquidity, noting an 83% directional correlation in any given 12-month period. However, Alden also emphasized that external economic factors could disrupt this pattern.
Impact of Trump’s Economic Policies
Some analysts suggest that US policy changes under President-elect Donald Trump could further influence Bitcoin’s trajectory. Trump’s proposal to impose tariffs on imported goods is expected to strengthen the US dollar, a trend that traditionally pressures riskier assets like Bitcoin.
Scott Bessent, a hedge fund manager, stated in a Bloomberg interview, “Tariffs cause a stronger dollar,” and added that a combination of tariffs and a weaker dollar would be an “economic abnormality.”
Current Market Conditions
As of now, Bitcoin is trading near $91,988, having narrowly missed breaking the $100,000 mark on Nov. 23 when it peaked at $99,571. Despite the recent pullback, Bitcoin remains in a bullish cycle, fueled by investor optimism and institutional interest.
What Lies Ahead for Bitcoin?
Potential Scenarios
- Correction to $70,000: If Bitcoin continues to follow M2 trends, a 20% drop could materialize, aligning with historical patterns.
- Continuation of Bullish Momentum: If external factors like dollar strength and market sentiment outweigh the M2 correlation, Bitcoin could resume its upward trend.
Key Factors to Monitor
- M2 Money Supply Trends: Any significant shifts in global liquidity could impact Bitcoin’s price.
- US Economic Policies: Tariffs and dollar strength may create headwinds for risk assets.
- Institutional Activity: Continued interest from institutional investors could bolster Bitcoin’s price resilience.
