Bitcoin Faces 25% Correction Risk Amid Global Liquidity Tightening
Bitcoin (BTC) price action continues to come under scrutiny as analysts consider its correlation with the global M2 money supply.
One notable prediction suggests that the pioneer cryptocurrency may be on the cusp of a 20-25% correction, consistent with the recent contraction in M2 liquidity.
Why Bitcoin could see a 25% correction
Head of Growth at Bitcoin custodian Theya, Joe Consorti highlighted Bitcoin’s close tracking of global M2, with a lag of approximately 70 days since September 2023. In a recent post on X (formerly Twitter), Consorti warned that Bitcoin could see a 25% correction as it continues to track global M2. M2,
“I don’t want to alarm anyone, but if this trend continues, Bitcoin could experience a 20-25% correction,” Consorti explain.
His analysis, which places M2 data ahead of Bitcoin prices by 70 days, reveals a worrying trajectory of tightening global liquidity. Consorti’s observation comes amid a rare dislocation in the M2 trend, which has historically aligned with Bitcoin price.
He attributed past disagreements, such as those during 2022, to past disagreements. FTX crashesactivities targeting specific markets. In hindsight, on September 30, Consorti Predictive If Bitcoin continues to mirror the M2 trend, it could reach $90,000 by the end of the year. This prediction has been accurately reflected in Bitcoin’s recent rally, reinforcing his credibility.
Another proponent of this correlation, user Joseph Scioscia, reiterated that Bitcoin is a reliable proxy for the M2 money supply trend. He recommends that investors adopt long-term dollar cost averaging (DCA) strategy, citing BTC’s historical resilience.
“Bitcoin is the best proxy for M2 money supply. The trend of M2 reveals the potential direction of BTC, especially since Bitcoin lags M2 by about 70 days. DCA of Bitcoin and adopt a long-term strategy,” Scioscia point out.
Yet doubts remain. An X user named Spicez criticized the focus on short-term data. They believe that a broader five-year chart will provide more insight into Bitcoin’s behavior during election cycles and the post-halving period.
“It would be nice to see this chart from the past 5 years. It could give us an idea of how BTC behaves against M2 during election cycles and after the last halving. This 2 year chart doesn’t tell us much at all Information,” Spicez be challenged.
The critical connection between M2 money supply and BTC
Global M2 supply measures the total amount of liquidity in an economy, including checking accounts, savings accounts and other liquid assets that can be quickly converted into cash. It has been a key driver of Bitcoin price movements.
Risky assets, including Bitcoin, are often associated with rising liquidity. The relationship between Bitcoin price and M2 expansion reflects broader market sentiment and economic conditions.
Higher M2 expansion signals looser monetary policy and an increase in the money supply, which typically boosts risky assets like cryptocurrencies. Historically, increases in M2 have corresponded with bullish trends in Bitcoin as liquidity flows into risk assets. Conversely, declines often signal an upcoming correction.
In a recent analysis, BeInCrypto echoed this connection, suggesting that global liquidity could help Bitcoin reach $100,000. as reportfactors such as 2024 Bitcoin Halving And the broader macroeconomic recovery tends to be a driver of Bitcoin prices.
this Interest in Bitcoin ETFs Rising (Exchange Traded Funds), especially from companies like BlackRockwhich can offset the pressure related to M2. Structural purchases of ETFs, coupled with corporate acquisitions, may provide a buffer against liquidity-driven selloffs.
Consorti added: “It (Bitcoin) may be resistant to these two months of M2 deflation due to structural ETF inflows and corporate buying pressure.”
While Bitcoin prices face potential headwinds from shrinking global liquidity, the market remains divided on its next move. Structural capital inflows and long-term adoption of strategies may moderate any negative impact. However, traders should be prepared volatility as macroeconomic factors It airs this week.
As of this writing, Bitcoin is trading at $94,395. BeInCrypto data shows that it has fallen 3.37% since the opening on Tuesday.
Disclaimer
follow trust project BeInCrypto is committed to fair and transparent reporting. This news article is designed to provide accurate and timely information. However, readers are advised to independently verify the facts and consult a professional before making any decisions based on the content of this article. Please note that our terms and Conditions, privacy policyand Disclaimer Updated.
