Bitcoin could drop 20% if moves stay tied with M2 money supply

Bitcoin could retrace toward $70,000 if it continues its long-standing correlation with the global money supply in cash and bank deposits, according to an analyst.

“We’ll have to see if BTC follows it all the way down or stops short and finds support,” Consorti added.

Consorti observed in an X post a day earlier on Nov. 25 that Bitcoin has tracked global M2 — an estimate of cash and short-term bank deposits — with about a “70-day lag” since September 2023.

The M2 money supply and its growth have historically been correlated with previous Bitcoin bull runs.

Bitcoin’s price has increased alongside the M2 money supply, as increased M2 often signals inflationary pressures, prompting investors to seek riskier assets like Bitcoin to hedge against inflation.

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

Macroeconomist Lyn Alden stated in a September 2024 report that Bitcoin moves in the direction of global liquidity 83% of the time in “any given 12-month period.”

However, not all analysts agree with Consorti’s forecast.

Market commentator David Quintieri wrote: “Bitcoin is too volatile to track it against anything.”

“All of these are just distractions. You could do it with the stock market, and it’s more realistic,” he added.

Meanwhile, Glassnode lead analyst James Check said that “much of this M2 decline is due to dollar strength, right? Effectively ‘devaluing’ the M2 of the ROW.”

Crypto commentator Sam KB wrote in a Nov. 22 X post, “Every time M2 hits a high, so does BTC... apart from this cycle.

“M2 is nearly at the lowest point this cycle... but BTC is rallying. What am I missing?” he added.

Some analysts warn that President-elect Donald Trump’s plan to impose tariffs on imported goods may strengthen the US dollar — a trend that has historically pressured riskier assets like Bitcoin.

At the time of publication, Bitcoin was trading at $91,988, just days after narrowly missing the highly anticipated $100,000 price level. Bitcoin reached its current peak of $99,571 on Nov. 23.

Bitcoin’s correlation with the global M2 suggests it could imminently drop 20%, but not all observers agree, It also implies that cryptocurrencies have a great future, give it a try for free.