Bitcoin's Price Surge: M2 Money Supply or Market Sentiment?
Bitcoin's price recently broke through the $100,000 mark, reaching a high of $104,000 before settling around $103,000. While positive news regarding US-China trade talks fueled initial optimism, analysts are exploring deeper underlying factors, particularly the global M2 money supply.
Global M2 Money Supply and Bitcoin's Price
Julien Bittel, a macro researcher at Global Macro Investor, suggests a correlation between the global M2 money supply and Bitcoin's price. He highlights a 12-week lag, implying that increases in M2 often precede Bitcoin price increases by approximately three months. His chart shows a strong correlation, with M2 recently exceeding $111 trillion, potentially signaling further Bitcoin growth in mid-2025.
Bittel stated, "We're going higher," citing the significant rise in global M2 as a key indicator.
However, this correlation isn't universally accepted.
Contrasting Perspectives on Bitcoin's Price Drivers
Analyst Benjamin Cohen challenges Bittel's timeline, pointing out that Bitcoin's price peaks in 2017 and 2021 preceded M2's peak. He suggests that Bitcoin's price movements may be a leading indicator for changes in global liquidity, rather than lagging behind. This perspective suggests that the recent Bitcoin rally might foreshadow a potential decrease in global liquidity in the coming months.
Cohen questions the established correlation, suggesting Bitcoin might "lead liquidity, rather than lag it."
Cohen further emphasizes the impact of unexpected events, such as the 2022 FTX collapse, which significantly disrupted Bitcoin's price trajectory despite M2's behavior. He concludes that while M2 may be a factor, it's not the sole determinant of Bitcoin's price.
Navigating Uncertainty in the Crypto Market
The contrasting views highlight the complexity of predicting Bitcoin's price. While the increasing global M2 presents a compelling argument for further price increases, the possibility of Bitcoin leading market trends suggests a need for caution. The influence of unforeseen events, such as exchange failures, adds another layer of uncertainty to any forecast.
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