In recent weeks, Bitcoin's price has shown signs of stagnation, leading many investors to question the reasons behind this phenomenon. A key factor that could change the situation is global liquidity, particularly the M2 money supply.
Reasons for Bitcoin Price Stagnation
Currently, Bitcoin's price is trading sideways, indicating a period of consolidation. According to an analysis by Negentropic, conducted by Glassnode founders Yann Allemann and Jan Happel, the market is in a peculiar equilibrium. Sellers seem to have exhausted their resources while buyers remain largely inactive. This creates a situation that hinders significant price fluctuations.
How Global Liquidity Drives Bitcoin Trends
The key to determining Bitcoin's next direction lies in global liquidity, specifically the M2 money supply. Negentropic emphasizes that only changes in global M2 can truly alter the current market trajectory. M2 represents the total amount of money circulating in an economy, including cash, checking deposits, and easily convertible assets.
Insights from M2 Money Supply Data
Data from the Federal Reserve Bank (FRED) provides a clear picture of recent M2 movements. For instance, M2 peaked at 22,055.1 on April 14 and stood at 22,005.4 as of July 30. While these figures represent a slight dip, the anticipated rise in M2 could reverse this trend, potentially accelerating Bitcoin's price growth.
In conclusion, while Bitcoin's current price action may seem uninspiring, underlying economic factors such as the anticipated rise in global liquidity and the M2 money supply may set the groundwork for significant movement ahead. Investors should closely monitor these macroeconomic indicators to better understand future processes in the crypto market.
