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Bitcoin (BTC) price continues to be in focus as analysts examine its correlation with the global M2 money supply.
One notable prediction suggests that the pioneering cryptocurrency could be on the brink of a 20–25% correction, in line with the recent contraction in M2 liquidity.
Why Bitcoin Could Face a 25% Correction
Joe Consorti, head of development at Bitcoin custody company Theya, highlighted Bitcoin’s close tracking of global M2 with an approximate 70-day lag from September 2023. In a recent post on X (formerly Twitter), Consorti warns of the possibility of a 25% BTC drop as it continues to monitor global M2,
“I don’t want to worry anyone, but if this trend continues, Bitcoin could experience a 20-25% correction,” Consorti speak.
His analysis puts M2 data 70 days ahead of Bitcoin price, revealing a worrying trend as global liquidity declines. Consorti’s observations come amid a rare shift away from the M2 trend, which is typically associated with Bitcoin price.
He attributes past deviations, such as in the 2022 FTX collapse, to specific market events. Looking back, on September 30, Consorti forecast Bitcoin could reach $90,000 by year-end if it continues to mirror M2 trends. That prediction took shape during BTC’s recent rally, bolstering his credibility.
Another supporter of this correlation, user Joseph Scioscia, reiterated that Bitcoin acts as a reliable proxy for M2 money supply trends. He advises investors to adopt a long-term price averaging strategy, emphasizing BTC’s historical resilience.
“Bitcoin is the best representation of M2 money supply. The trend in M2 reveals a potential direction in BTC, especially with Bitcoin’s roughly 70-day lag relative to M2. DCA in Bitcoin and Adopting a Long-Term Strategy,” Scioscia stated.
However, skepticism remains. An X user named Spicez criticized the emphasis on short-term data. They argue that a broader five-year chart would yield more insights into Bitcoin’s behavior during election cycles and recent post-deflation periods.
“It would be nice to see this chart over the last five years. That will show us BTC’s behavior towards M2 during the election cycle and how it performed after the latest deflation. This two-year chart doesn’t tell us much,” Spicez challenge.
Important Link Between M2 Money Supply and BTC
The global M2 supply measures total liquidity in the economy, including checking accounts, savings accounts and liquid assets that can be quickly converted into cash. It has become a major driver of Bitcoin’s price movements.
Risky assets, including Bitcoin, are often correlated with increased liquidity. The relationship between Bitcoin price and M2 expansion reflects market sentiment and broader economic conditions.
Higher M2 expansion indicates a loose monetary policy and an increased amount of money, often boosting risk assets such as cryptocurrencies. Historically, increases in M2 correspond to bullish trends for Bitcoin as liquidity flows into risk assets. Conversely, declines often signal upcoming corrections.
In a recent analysis, TinTucBitcoin highlights this link, suggesting that global liquidity could help Bitcoin reach $100,000. As reported, factors such as the 2024 Bitcoin deflation and broader macroeconomic recoveries often act as tail drivers for BTC prices.
Growing interest in Bitcoin ETFs (exchange-traded funds), especially from institutions like BlackRock, could be counterproductive to M2-related pressures. Structured buy-ins from ETFs, along with corporate buybacks, can provide a cushion against liquidity-driven sell-offs.
“Bitcoin can bypass this 2-month long M2 liquidity drawdown thanks to structured ETF inflows + corporate buying pressure,” Consorti added.
While Bitcoin price faces potential headwinds from shrinking global liquidity, the market remains divided on its next move. Structured cash flow and long-term adoption strategies can reduce any downside. However, traders should prepare for volatility as macroeconomic factors evolve this week.
Currently, Bitcoin is trading at $94,395. Data from TinTucBitcoin shows it is down 3.37% since Tuesday’s trading session opened.
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