Bitcoin recently surged past $100,000, sparking debate among analysts. While some attribute the rise to positive trade news between the US and China, others point to a more significant factor: global money supply.
The Global M2 Money Supply: A Bitcoin Predictor?
Julien Bittel, a macro researcher, believes the global M2 money supply (a measure of the total money in circulation) is a key indicator for Bitcoin’s price. He’s observed a roughly 12-week lag: increases in M2 tend to be followed by Bitcoin price increases three months later. His chart shows this correlation, suggesting that with M2 exceeding $111 trillion, Bitcoin could continue its upward trend.
Bittel’s prediction is based on the recent surge in M2 and the historical correlation he’s identified. He sees this as a strong signal for further Bitcoin price increases.
A Different Perspective: Does Bitcoin Lead, or Follow?
However, not everyone agrees with Bittel’s analysis. Analyst Benjamin Cohen challenges the idea that Bitcoin always
lags behind M2. He points out that Bitcoin reached its all-time highs in 2017 and 2021 before M2 peaked, contradicting the 12-week lag theory.
Cohen suggests Bitcoin might actually lead
the changes in M2, meaning the recent price increase could foreshadow a future decrease in global liquidity. He also highlights the impact of unforeseen events, like the FTX collapse in 2022, which disrupted the usual correlation between Bitcoin’s price and M2.
The FTX Fallout and Unpredictability
The 2022 FTX collapse serves as a reminder that unexpected events can significantly impact Bitcoin’s price, regardless of M2 trends. This highlights the inherent volatility of the cryptocurrency market and the limitations of relying solely on one indicator for forecasting.
The Bottom Line: Uncertainty Remains
While the correlation between global M2 and Bitcoin’s price is interesting, it’s not a foolproof prediction model. Both Bittel and Cohen offer valuable insights, but ultimately, the future price of Bitcoin remains uncertain. Unforeseen events and market dynamics can significantly influence its trajectory.