Bitcoin Could Fall 20% if It Remains Linked to M2 Money Supply, Analyst Warns

According to one researcher, Bitcoin's association with the global M2 predicts it could plummet by 20% soon, but not all observers agree.

According to one researcher, Bitcoin might retreat to $70,000 if it maintains its long-standing link with the global money supply in cash and bank deposits.

"So far, this correlation is shockingly accurate," Theya Bitcoin head of growth and Bitcoin BTC tickers down $93,599 analyst Joe Consorti stated in a Nov. 26 post.

BTC may see a downturn before reaching $100,000

"We'll have to see if BTC follows it down or stops short and finds support," he said.

Onsorti remarked in an X post a day earlier on Nov. 25 that Bitcoin has tracked worldwide M2 — an estimate of cash and short-term bank deposits — with a "70-day lag" since September 2023.

The M2 money supply and its increase have historically been linked to past Bitcoin bull markets.

Bitcoin's price has risen in tandem with the M2 money supply, as rising M2 often indicates inflationary pressures, pushing investors to seek riskier assets such as 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," said Consorti.

According to macroeconomist Lyn Alden's September 2024 analysis, Bitcoin flows in the direction of global liquidity 83% of the time in "any given 12-month period."

However, not all analysts support Consorti's forecast.

According to market analyst David Quintieri, "Bitcoin is too volatile to track against anything."

"All of these are simply distractions. You could do it with the stock market, which is more realistic," he explained.

Meanwhile, Glassnode's chief analyst James Check stated, "Much of this M2 decline is due to dollar strength, right?" Effectively 'devaluing' the ROW's M2.

In a Nov. 22 X post, crypto analyst Sam KB stated, "Every time M2 hits a high, so does BTC... except for this cycle.

"M2 is almost at its lowest point this cycle... but Bitcoin is surging. "What am I missing?"

Trump’s plans may enhance the dollar.

Some analysts worry that President-elect Donald Trump's promise to impose tariffs on imported products may strengthen the US currency, which has historically put pressure on riskier assets such as bitcoin.