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Investors have expressed concern over bitcoin's recent price fluctuations, particularly in light of analyst predictions of a 20-25% decline in the global M2 money supply.
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At $92,864, bitcoin is down nearly 9% from its recent high of just under $100,000. That drop is part of a profit-taking trend by long-term holders, who sold 366,000 btc in the last month, the most since April 2024.
Introduction to the M2 Money Supply Connection
Market researchers have been studying the relationship between bitcoin prices and Global money circulation M2. crypto analyst Joe Consorti noted that bitcoin prices have regularly followed M2 prices, albeit 70 days later.
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bitcoin has followed the global M2 with a lag of ~70 days since September 2023.
I don't want to alarm anyone, but if this continues, bitcoin could see a 20-25% correction.
M2 Global in
bitcoin in pic.twitter.com/PlPoaHUoFR
– Joe Consorti (@JoeConsorti) <a target="_blank" href="https://twitter.com/JoeConsorti/status/1861125527764971521?ref_src=twsrc%5Etfw” rel=”nofollow”>November 25, 2024
That is, <a target="_blank" href="https://www.coingecko.com/en/coins/bitcoin” target=”_blank” rel=”nofollow”>The price of bitcoin The downward trend of M2 is likely to follow in the near future. The latest drop in M2 shows that bitcoin could fall to important support levels of $88,000 or even $80,000 if things continue as they are.
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UPDATE: One day after my last chart, bitcoin is now down $5,000, closely following the path set by the global M2 several weeks ago.
So far, this correlation is surprisingly accurate.
We will have to see if btc follows it all the way, or stops and finds support.
– Joe Consorti (@JoeConsorti) <a target="_blank" href="https://twitter.com/JoeConsorti/status/1861510519276147151?ref_src=twsrc%5Etfw” rel=”nofollow”>November 26, 2024
bitcoin has been weakening as it cannot stay above $94,000. Since breaching these liquidity zones could lead to further declines, analysts are watching them closely. Investors are worried because the chances of bitcoin reaching $100,000 by the end of the year have plummeted from 92% to 64%.
Pressure from long-term holders to sell
The most recent data from Glassnode indicates that long-term holders (LTH) have been more <a target="_blank" href="https://studio.glassnode.com/dashboards/btc-onchain-activity” target=”_blank” rel=”nofollow”>active in salewith more than 507,000 btc distributed since September 2023. This selling pressure is substantial and indicates that numerous investors are liquidating their profits in the context of the current market volatility.
The potential shift in market sentiment, suggested by increased activity among LTHs, could further exacerbate the downward pressure on bitcoin price.
Furthermore, the realized profit/loss (P/L) ratio has reached new all-time highs, indicating an overheated market. An increase in this ratio usually means that a considerable portion of investors are benefiting from price increases. Analysts warn that bitcoin's rising momentum may be waning due to the current trend of profit-taking and declining liquidity.
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bitcoin future prospects: what awaits us?
As it works its way through these challenges, the future of bitcoin is still quite unclear. Although there are market observers who believe that the price of the leading cryptocurrency can normalize at lower levels, there are also analysts who warn that additional corrections could be necessary if global liquidity continues to decline.
Featured image of DALL-E, TradingView chart
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