Bitcoin Could Drop 20% Following M2 Money Supply Correlation

Bitcoin’s BTC $84 301 24h volatility: 0.9% Market cap: $1.67 T Vol. 24h: $30.24 B potential for reaching new price peaks faces a significant obstacle, with analysts predicting a 20% or greater decline if its established link with the global M2 money supply persists. The M2 money supply, encompassing cash and short-term deposits, has served as a key indicator of Bitcoin’s price trends historically. Joe Consorti, head of growth at Theya Bitcoin, predicts a price pullback to $70,000 if this pattern continues.

Consorti issued a cautionary statement on social media platform X, highlighting the remarkable accuracy of this correlation. He expressed uncertainty over whether Bitcoin would follow the M2 supply’s trajectory all the way down or find support before reaching that point. Since September 2023, Bitcoin has demonstrated a 70-day delay in mirroring the global M2 money supply movement.

Bitcoin Trends Mirror Global M2 Shifts

Bitcoin’s value has historically risen with the global M2 money supply, particularly during inflationary periods. Expanding M2 often signals inflation, prompting investors to consider Bitcoin as a hedge against increasing prices. Similar patterns emerged during previous bull runs. However, analyst Joe Consorti anticipates a 20-25% drop in Bitcoin’s value, attributing this prediction to ongoing trends that could potentially drive significant declines.

On November 25, 2024, Consorti highlighted Bitcoin’s tendency to follow M2 movements with a 70-day delay. He observed this correlation consistently since mid-2023, underscoring its importance for market analysis. He warned of the potential for corrections if the trend persists, noting the historical reliability of this relationship.

“I don’t want to alarm anyone, but if it continues, Bitcoin could be in for a 20-25% correction,” Consorti warned.

Contrasting perspectives exist among experts. Macroeconomist Lyn Alden noted in a September 2024 report that Bitcoin aligns with global liquidity trends 83% of the time over a 12-month period, moving alongside M2. Despite this observation, some commentators remain skeptical. Analyst David Quintieri dismissed such correlations, emphasizing Bitcoin’s extreme volatility, which he argued undermines its connection to any metric. 

“Bitcoin is too volatile to track it against anything. All of these are just distractions. You could do it with the stock market, and it’s more realistic,” said David.

Meanwhile, Glassnode’s lead analyst, James Check, offered a different perspective, explaining that much of the recent decline in M2 was due to dollar strength, effectively “devaluing” the M2 of other countries. 

Bitcoin Defies Trends amid US Tariff Concerns

Analysts express concerns about external influences, such as potential US tariff changes, affecting Bitcoin. On November 22, crypto analyst Sam KB highlighted a notable anomaly in market behavior. Historically, Bitcoin rallies have aligned with peaks in M2 money supply. However, during the current cycle, despite M2 reaching its lowest level, Bitcoin continues to surge.

“Despite M2 being at its lowest point this cycle, Bitcoin has continued to rally, leaving many to question the disconnect between the two. “M2 is nearly at the lowest point this cycle… but BTC is rallying. What am I missing?” he wrote.

Adding to the uncertainty, President-elect Donald Trump’s plans to impose tariffs on imported goods could further strengthen the US dollar. Hedge fund manager Scott Bessent addressed this issue in a Bloomberg interview on November 5, pointing out that “Tariffs cause a stronger dollar,” which could lead to challenges for Bitcoin.

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