Global M2 money supply growth has drawn the attention of cryptocurrency analysts due to its strong correlation with Bitcoin price movements. The year-on-year M2 expansion rate for the four largest central banks reached 3.65% in January, suggesting increased liquidity in financial markets.
M2 Growth and Bitcoin’s Historical Correlation
Economists and market analysts study the relationship between monetary expansion and cryptocurrency prices. Economist Lyn Alden states that Bitcoin historically moves in sync with global M2 liquidity trends. Pav Hundal from Swyftx echoed this sentiment, noting that global loosening measures are a reliable lead indicator for crypto markets. He emphasized that spot buyers are currently active, while the U.S. recently raised its debt ceiling by $4 trillion, adding more liquidity to the financial system.
Volatility and ETF Sell-Offs Create Short-Term Pressure
Despite optimism around M2 expansion, Bitcoin has faced short-term volatility, dropping below $90,000 after former U.S. President Donald Trump's remarks on tariffs. Bitcoin is currently trading at $93,775, down 13.3% from its all-time high of $108,786 in late 2024. Arthur Hayes from BitMEX warned that Bitcoin could fall to $70,000 if hedge funds unwind their spot ETF positions tied to futures arbitrage strategies.
Market Outlook: Strong March or Further Corrections?
Analysts are divided on Bitcoin’s long-term trajectory. Pav Hundal from Swyftx urges investors to be cautious. Analysts point out that the Global M2 Money Supply indicates a major move is coming, but the timing remains uncertain.
Traders are cautiously observing whether liquidity growth will be enough to push Bitcoin back towards $100,000 and beyond in the coming months.
