Bitcoin could retrace toward $70,000 if it continues its long-standing correlation with the global money supply in cash and bank deposits, according to an analyst.
“So far, this correlation is shockingly accurate,” Theya Bitcoin head of growth and Bitcoin (BTC) analyst Joe Consorti said in a Nov. 26 X post.
BTC may be in for a correction before $100,000
“We’ll have to see if BTC follows it all the way down or stops short and finds support,” Consorti added.
Bitcoin and Global M2 correlation graph. Source: X/Joe Consorti
Consorti observed in an X post a day earlier on Nov. 25 that Bitcoin has tracked global M2 — an estimate of cash and short-term bank deposits — with about a “70-day lag” since September 2023.
The M2 money supply and its growth have historically been correlated with previous Bitcoin bull runs.
Bitcoin’s price has increased alongside the M2 money supply, as increased M2 often signals inflationary pressures, prompting investors to seek riskier assets like Bitcoin to hedge against inflation.
“I don’t want to alarm anyone, but if it continues, Bitcoin could be in for a 20-25% correction,” Consorti added.
Macroeconomist Lyn Alden stated in a September 2024 report that Bitcoin moves in the direction of global liquidity 83% of the time in “any given 12-month period.”
Lyn Alden points out that Bitcoin’s correlation with M2 is higher than any other asset class. Source: Lyn Alden
However, not all analysts agree with Consorti’s forecast.
Market commentator David Quintieri wrote: “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,” he added.
Meanwhile, Glassnode lead analyst James Check said that “much of this M2 decline is due to dollar strength, right? Effectively ‘devaluing’ the M2 of the ROW.”
Crypto commentator Sam KB wrote in a Nov. 22 X post, “Every time M2 hits a high, so does BTC... apart from this cycle.
“M2 is nearly at the lowest point this cycle... but BTC is rallying. What am I missing?” he added.
Trump's policies may strengthen dollar
Some analysts warn that President-elect Donald Trump’s plan to impose tariffs on imported goods may strengthen the US dollar — a trend that has historically pressured riskier assets like Bitcoin.
Related: Did 8% Bitcoin price drop changbulls’s' chance of BTC hitting $100K?
On Nov. 5, hedge fund manager Scott Bessent pointed out in a Bloomberg interview that “Tariffs cause a stronger dollar.”
“A weaker dollar with tariffs is an economic abnormality.”
At the time of publication, Bitcoin was trading at $91,988, just days after narrowly missing the highly anticipated $100,000 price level. Bitcoin reached its current peak of $99,571 on Nov. 23.
Magazine: Bitcoin dominance will fall in 2025: Benjamin Cowen, X Hall of Flame
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.