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- Bitcoin’s price shows a strong correlation with the M2 money supply, suggesting a potential rise in the near future.
- BTC’s scarcity, with only 21 million coins, makes it a promising hedge against inflation amid rising global liquidity.
- Analysts predict Bitcoin’s price will follow the M2 money supply’s growth, with a typical 10-week lag before price increases.
Bitcoin (BTC prices) has been closely related with M2 money supply which points to a bullish outlook for Bitcoin. M2 is money plus the money that is readily available and globally, this has only risen by 4.5 trillion this current year. Bitcoin tends to lag behind these changes for about 10 weeks suggesting that a price increase could be on the horizon.
Bitcoin Follow M2 Trends
Joe Consorti said that “Bitcoin is inflecting higher, like clockwork,” meaning that Bitcoin reflects M2 at a certain phase at some degree of lag. Historical analysis of the sources shows that the Bitcoin price rises when the global assets, in this case the M2 money supply, increases.
Conservatism and scarcity are another two key premises that are inherent in the BTC lure. Unlike most money out there that can be produced at will, there will be only 21 million BTC. Due to the limited availability, it shows promise as an investment worthy of capital in reserve against inflation. As the central banks are printing more and more paper money, the limited number of BTC is becoming advantageous.
In January of this year, the price of BTC rose well past $109,000. This was during the period of devaluations of various world currencies as well as a general increase in inflation rates. However, it has reduced in price and it is currently at $84,502. Nonetheless, BTC could bounce back and garner new investors since there is an increase in the M2 money supply and aligning it with previous trends.
Global Liquidity and BTC
Therefore, based on the positive correlation between Bitcoin and M2 money supply, its price is likely to increase in the near future. This means that one ten-week lag shows that Bitcoin’s prices tend to copy the path of M2. Hence, with an increase in global liquidity levels, the same is anticipate to happen to Bitcoin.
Despite the growing liquidity in the global market, Bitcoin is still one of the most significant investments today. Due to it being a scarce instrument and its positive relationship with the M2 money supply, makes it effective for inflation hedge. The cryptocurrency has become a subject of significant discussion because it is connected to the operations of the global financial markets, especially in relation to its price fluctuations.
