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Investors have expressed concern about Bitcoin’s recent price fluctuations, especially in light of analysts’ predictions of a 20-25% decline in the global M2 money supply.
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At $92,864, Bitcoin is down almost 9% from its recent high of just under $100,000. That drop is part of a trend of profit-taking by long-term holders, who sold 366,000 BTC last month, the most since April 2024.
Introduction to the M2 money supply connection
Market researchers have studied the relationship between Bitcoin prices global M2 money circulation. Crypto analyst Joe Consorti noted that Bitcoin prices regularly followed M2 prices, albeit 70 days later.
Bitcoin has followed the global M2 with a lag of ~70 days since September 2023.
I don’t want to worry anyone, but if this continues, Bitcoin could experience a 20-25% correction.
Global M2 in ⚪️
Bitcoin in 🟠 pic.twitter.com/PlPoaHUoFR— Joe Consorti ⚡️ (@JoeConsorti) November 25, 2024
That is to say, Bitcoin’s price is likely to follow the trend of a declining M2 for the foreseeable future. The latest decline in the M2 shows that Bitcoin could fall to key support levels at $88,000 or even $80,000 if things continue as they are going now.
UPDATE: A day after my last chart, Bitcoin is now $5,000 lower, following the path that the global M2 very closely plotted a few weeks ago.
So far, this correlation is shockingly accurate.
We will have to see if BTC follows it all the way, or stops and finds support.
🍿🍿🍿 pic.twitter.com/oEGOuYYRio
— Joe Consorti ⚡️ (@JoeConsorti) November 26, 2024
Bitcoin is weakening as it cannot stay above $94,000. Since breaking through these liquidity zones could cause bigger declines, analysts are watching them closely. Investors are concerned as the odds of Bitcoin reaching $100,000 by the end of the year have plummeted from 92% to 64%.
The pressure from long-term holders to sell
The latest data from Glassnode indicates that there have been more long-term holders (LTHs). active in saleswith over 507,000 BTC distributed since September 2023. This selling pressure is significant and indicates that numerous investors are liquidating their gains in the context of the current market volatility.
The potential shift in market sentiment suggested by the increased activity among LTHs could further exacerbate downward pressure on Bitcoin’s price.
Furthermore, the realized earnings/loss (P/L) ratio has reached new all-time highs, indicating an overheated market. An increase in this ratio usually means that a significant portion of investors benefit from price increases. Analysts warn that Bitcoin’s bullish momentum may be waning due to the current trend of profit-taking and declining liquidity.
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Bitcoin Future Outlook – What lies ahead?
As it works its way through these challenges, Bitcoin’s future is still quite foggy. Despite the fact that there are market observers who believe that the price of the top crypto could normalize at lower levels, there are also analysts who warn that additional corrections may be necessary if global liquidity continues to decline.
Featured image of DALL-E, chart from TradingView