Bitcoin Price May Drop 20% If M2 Correlation Persists - Analyst Insights

Analyst Predicts Bitcoin Could Drop 20% Due to M2 Correlation

Bitcoin’s (BTC) price may potentially face a significant correction of 20% to 25% if its longstanding correlation with the global M2 money supply persists. Joe Consorti, the head of growth at Theya Bitcoin, explains that this projection could bring BTC down to around $70,000, just days after it narrowly missed the coveted $100,000 milestone on November 23.

M2 Correlation and Bitcoin’s Price Movements

Historical Correlation With M2

Analysis reveals that since September 2023, Bitcoin has shown a notable correlation with the global M2 money supply—a measure that encompasses cash and short-term bank deposits—with a significant 70-day lag. According to Consorti, historical trends indicate that an increase in M2 growth typically signals inflationary pressures. This scenario often prompts investors to buy Bitcoin as a hedge against inflation, thereby driving its value up.

Potential 20% Correction

If the established correlation between Bitcoin and the M2 money supply continues, BTC might see a drop to the range of $70,000 to $75,000. Consorti articulated his perspective: “We’ll have to see if BTC follows it all the way down or stops short and finds support.”

Expert Insight: Lyn Alden

Supporting the M2 correlation theory, macroeconomist Lyn Alden noted that Bitcoin tends to move in the direction of global liquidity 83% of the time over any 12-month period. This statistic further cements the argument for the correlation's significance in assessing Bitcoin's future price movements.

Divided Opinions on Bitcoin’s M2 Dependency

Skeptics Question Correlation

However, not all market analysts are on board with Consorti’s forecast. David Quintieri, a market commentator, voiced skepticism regarding the correlation, asserting: “Bitcoin (BTC) is too volatile to track it against anything.” Meanwhile, Glassnode’s James Check pointed to recent declines in M2, attributing these changes to dollar strength which, in his view, skews the correlation.

Counterarguments on M2 Decline

Crypto analyst Sam KB has raised questions about the current market behavior, arguing: “M2 is nearly at the lowest point this cycle... but BTC is rallying. What am I missing?” This indicates that there may be more complexities to the relationship between Bitcoin and the M2 metric than initially assessed.

Trump Policies and Dollar Strength: Implications for Bitcoin

Impact of Tariffs on USD

Beyond M2 correlation, broader economic policies play a role in Bitcoin's potential for price movement. Notably, Donald Trump's tariff proposals could exert upward pressure on the U.S. dollar, historically leading to downward pressure on risk assets, including Bitcoin. Hedge fund manager Scott Bessent observed, “Tariffs cause a stronger dollar.”

Bitcoin's Recent Performance

Bitcoin recently peaked at approximately $99,571 on November 23, only to correct to a lower price of about $91,988. This fluctuation raises concerns among investors regarding its ability to reclaim the six-figure territory in the near term. The market is left wondering: Is this a precursor to a drop or simply a pause before Bitcoin’s next drive towards $100,000?

Conclusion

As Bitcoin navigates through these market dynamics, understanding the correlation with M2 money supply and external economic influences will be essential for investors and analysts alike. The discourse among experts highlights both opportunities and uncertainties surrounding Bitcoin’s future, reaffirming the cryptocurrency’s status as a volatile but highly discussed asset in financial markets.