Global liquidity has become an important indicator for financial markets and Bitcoin prices. Increased liquidity leads to greater interest in riskier assets, including Bitcoin.
Impact of Global M2 on Bitcoin
Global M2 includes cash and liquid assets and influences Bitcoin prices based on central bank monetary policies. Historical data shows that a significant rise in M2 in 2020 due to stimulative measures coincided with a major increase in Bitcoin prices. Similar trends are observed during the expansions of 2016-2017 and contractions in 2018-2019 and 2022.
Can M2 Patterns Predict Bitcoin Prices?
Analyzing changes in M2 reveals a strong correlation with Bitcoin's market value, as the increase in money supply has become the norm. The acceleration or deceleration of these increases influences Bitcoin's bullish or bearish tendencies. However, M2 updates experience a lag, leading to delayed responses, as liquidity first flows into traditional assets before reaching riskier assets like cryptocurrencies.
Importance of Stablecoins in Bitcoin Analysis
Stablecoins provide a more immediate view of liquidity shifts compared to M2 data. The correlation between shifts in stablecoin supplies, such as USDT, USDC, and DAI, and Bitcoin prices is more pronounced. A surge or decrease in these supplies typically forecasts substantial short-term movements in Bitcoin’s market position. For instance, an increase in stablecoin supply in late 2024 aligned with Bitcoin’s price peak, while a decrease indicated subsequent price drops.
Monitoring stablecoin supply provides real-time data, allowing more effective reactions to Bitcoin price changes. While stablecoins are crucial for quick analysis, long-term trends still depend on global M2 metrics.
