Bitcoin’s trajectory is being predicted using a less traditional indicator: the M2 money supply. The M2 money supply represents the total number of different currency and commercial paper units in circulation. Surprisingly, this metric shows a similar trend to Bitcoin’s bullish cycles, raising questions about its future influence in the market.
Analysts have observed the historical correlation between the growth of the M2 money supply and Bitcoin’s rally, suggesting that it could be a useful tool for predicting Bitcoin’s performance. Jamie Coutts, a crypto analyst, explains that the strength of the US dollar is closely linked to the weakness of cryptocurrencies, according to his recent analysis.
Within Coutts’ Bitcoin/Liquidity framework, M2 emerges as the most influential factor in Bitcoin’s bull cycle. However, it’s not just the amount of money that matters, but also the rate at which it changes. Coutts emphasizes that the speed of M2 volume variations and their correlation with Bitcoin prices are the key factors to consider.
Central banks also view an increase in the M2 money supply as a positive signal for improved economic conditions. This has led to increased attention from investors who are closely monitoring developments related to M2 money supply.
By the end of May 2033, the M2 money stock showed a positive increase in annual comparisons for the first time since November 2023. This indicates a possible shift in investor behavior, with less investment in assets like Bitcoin due to concerns about inflation.
In addition to the M2 money supply, analysts are also paying close attention to the behavior of the US dollar, as it has a significant impact on Bitcoin’s price dynamics. Coutts notes that the movement of the dollar determines the direction of Bitcoin’s growth or decline. If the dollar falls below the 101 barrier, it could strengthen the upward trend for Bitcoin. Market players are closely monitoring the charts and looking for levels of support, hoping to either maintain the current situation or initiate a corrective trend.
