Storm Ahead? Bitcoin Price Could Tumble 20% Due To M2 Supply Concerns

Investors have expressed apprehension regarding the recent price fluctuations of Bitcoin, particularly in light of analysts’ predictions of a 20-25% decline in the global M2 money supply.

At $92,864, bitcoin is down nearly 9% from its recent high of just under $100,000. That fall is part of a trend of profit-taking by long-term holders, who sold 366,000 BTC in the last month, the most since April 2024.

Introduction To The M2 Money Supply Connection

Market researchers have been studying the relationship between Bitcoin prices and global M2 money circulation. Crypto analyst Joe Consorti noted that Bitcoin prices have regularly tracked M2 pricing, albeit 70 days later.

Bitcoin has tracked global M2 with a ~70-day lag since September 2023.

I don’t want to alarm anyone, but if it continues, bitcoin could be in for a 20-25% correction.

Global M2 in Bitcoin in pic.twitter.com/PlPoaHUoFR

— Joe Consorti (@JoeConsorti) November 25, 2024

That is, Bitcoin’s price is likely to follow the trend of M2 going down in the near future. The latest drop in M2 shows that Bitcoin might fall to important support levels of $88,000 or even $80,000 if things keep going the way they are.

UPDATE: One day after my last chart, bitcoin is now $5,000 lower, following the path set by global M2 several weeks ago very closely.

So far, this correlation is shockingly accurate.

We’ll have to see if BTC follows it all the way down, or stops short & finds support.

pic.twitter.com/oEGOuYYRio

— Joe Consorti (@JoeConsorti) November 26, 2024

Bitcoin has been weakening as it can’t stay over $94,000. Because breaking these liquidity zones could cause greater declines, analysts are watching them attentively. Investors are worried because Bitcoin’s chance of reaching $100,000 by year’s end has plummeted from 92% to 64%.

Long-Term Holders’ Pressure To Sell

Glassnode’s most recent data indicates that long-term holders (LTHs) have been more active in selling, with over 507,000 BTC distributed since September 2023. This selling pressure is substantial and indicates that numerous investors are liquidating their profits in the context of the current market volatility.

The potential shift in market sentiment, which is suggested by the increased activity among LTHs, could further exacerbate the downward pressure on Bitcoin’s price.

Additionally, the Realized Profit/Loss (P/L) ratio has reached new historical highs, indicating an overheated market. An increase in this ratio typically means that a sizable portion of investors are benefiting from price increases. Analysts caution that Bitcoin’s rising momentum may be waning due to the current trend of profit-taking and decreasing liquidity.

As it works its way through these challenges, the future of Bitcoin is still quite foggy. Despite the fact that there are market observers who believe that the price of the top crypto can normalize at lower levels, there are also analysts who warn that additional corrections might be required if global liquidity continues to decrease.

Featured image from DALL-E, chart from TradingView