Why is Bitcoin Struggling to Cross $100K? Money Supply Trends Analysis

Over the past decade, the global money supply has increased by at least $50 trillion, boosting the growth of many financial markets, including cryptocurrency. Bitcoin (BTC), often seen as a hedge against inflation, has especially benefited from this surge. But recently, the global money supply has dropped sharply, and Bitcoin is finding it difficult to hit the coveted $100K mark.

Could Bitcoin’s current struggles be linked to the falling money supply? Let’s explore this in more detail.

Bitcoin’s Price Surge and Slowdown

Bitcoin started at around $69,542.78 and surged by more than 45.82% between November 5 and 22, reaching an all-time high of $98,884.91. However, the momentum slowed shortly after.

Between November 24 and 26, Bitcoin saw its first major price drop since November 5, falling by over 7.06%. The market has not fully recovered from this correction, and just yesterday, BTC dropped another 0.23%.

How M2 Money Supply Affects Bitcoin’s Price

The M2 Growth Year-over-Year (YoY) index tracks changes in the global money supply. This year, it has fluctuated significantly. At the start of the year, the M2 index was at 3.19%, but it fell to -0.18% in mid-February. By early March, it sharply rose to 2.72%, only to dip again to -0.34% by mid-April.

The index saw another sharp rise between August 5 and September 30, climbing from 4.17% to 7.09%. But it has since fallen to 1.83%.

Bitcoin has historically thrived during periods of rising M2 growth. For example, when the M2 index jumped from -0.18% to 2.72% between February 12 and March 4, Bitcoin hit its previous all-time high of $73,000. If the index continues to decline, it could limit Bitcoin’s short-term growth potential.

The Impact of Liquidity on Bitcoin’s Volatility

Low liquidity often results in higher volatility in the Bitcoin market. As liquidity decreases, price swings become more extreme, which adds to the uncertainty in the market.

At the time of writing, the global M2 supply stands at approximately $105.09 trillion, 2.24% lower than the $108.02 trillion supply on September 30. This decline in money supply plays a crucial role in Bitcoin’s price movements.

Here’s What Investors Need to Know

As global money supply trends continue to shift, Bitcoin’s price will likely remain tied to liquidity changes. While decreasing liquidity could slow down Bitcoin’s momentum, its long-term potential remains intact.

Investors will need to keep a close eye on macroeconomic indicators, especially the M2 index, to understand where Bitcoin’s price might be heading next.

With liquidity at the forefront, Bitcoin’s price may face more turbulence, but its long-term potential remains as intriguing as ever.

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