Bitcoin’s recent surge has been closely aligned with the trend of global M2 money supply, a factor that now raises alarms for a possible correction, according to Joe Consorti, Head of Growth at Theya (YC).
What Happened: Consorti pointed out this significant correlation in a post on social media, noting, “Bitcoin has followed global M2 with extreme precision since September last year.” M2 represents a broad definition of money in circulation, encompassing cash, deposits, and near-liquid assets, making it a reliable indicator of economic liquidity.
Since the cryptocurrency’s leap from around $40,000 to over $100,000, there’s been a notable relationship with periods of liquidity expansion. However, recent contractions in global M2 have led Consorti to warn that Bitcoin could soon see a correction, potentially dropping back to around $90,000 or lower.
Historically, Bitcoin tends to respond to changes in M2 with a delay of about 10 weeks, which positions this correlation as a strong predictor for potential price shifts. Consorti observed that “global liquidity has been contracting for the last six weeks,” and emphasized that Bitcoin is likely to follow this pattern.
Even with potential risks looming, he expressed that Bitcoin might still deviate from M2 trajectories given favorable circumstances. He stated, “Native buying pressure and favorable events could help Bitcoin decouple from global M2, though it remains uncertain for now.”
His insights also take into account the impact of broader macroeconomic factors, such as policies from the U.S. Federal Reserve and varying fiscal stimulus efforts. While there are supportive conditions that could act as a buffer, concerns over the contraction in global M2 and liquidity are still at the forefront.
In a recent update, Consorti mentioned, “Bitcoin is down ~$7,500 to $92,500, following global M2 (USD-denominated) to a T. Favorable BTC-native events could help buck this trend.”
While some volatility is anticipated, Consorti remains hopeful about Bitcoin’s long-term trajectory. He cites increasing adoption, institutional interest, and structural demand as potential stabilizers, helping Bitcoin weather any macroeconomic storms it may face.
As the new year approaches, investors watch closely—will Bitcoin maintain its course, or will the economic indicators lead to a dip? We’ve seen the strength of the USD impact cryptocurrencies before, and similar forces could play out again. Keep your eyes peeled for the next moves; it looks like we’re in for an intriguing ride!
