Bitcoin’s trajectory is being predicted using a less conventional indicator: the M2 money supply. The M2 money supply refers to the total number of different currency and commercial paper units in circulation. Surprisingly, this metric has shown a trend similar to Bitcoin’s bullish cycles, casting doubt on its future role in influencing the market.
Analysts have studied the historical correlation between the growth of the M2 money supply and Bitcoin’s rally, and it seems that the former could be a tool for boosting the latter. Crypto analyst Jamie Coutts explains that the strength of the US dollar is strongly correlated with weakness in cryptocurrencies, and the M2 money supply is the index globally showing the strongest association with Bitcoin’s bull cycle.
However, it’s not just the amount of money in circulation that matters, but also the rate at which it changes. Coutts emphasizes that the speed of M2 volume variations and Bitcoin price interrelations are more significant than absolute quantities. Central banks view a rise in the M2 money supply as a positive signal, and even investors are paying attention to developments related to it.
Interestingly, the M2 money stock showed a positive increase in annual comparisons for the first time in May 2033, after a period of decline since November 2023. This turnaround suggests a possible shift in investor behavior, as they become less inclined to invest in assets like Bitcoin due to inflation.
Aside from the M2 money supply, analysts also pay attention to the behavior of the US dollar, which has a significant impact on Bitcoin price dynamics. Coutts explains that the movement of the dollar determines the direction of Bitcoin’s growth or fall. A slump below the 101 barrier would strengthen the upward trend. Market players closely monitor the dollar’s movements and search for levels of support on charts, hoping to either maintain the status quo or initiate a corrective trend.
