The global M2 money supply’s expansion is emerging as a potential catalyst for a significant Bitcoin rally. Analysts are observing this trend closely, though they advise caution against overcommitting based on this single indicator.
Correlation Between Money Supply and Bitcoin’s Trajectory
Pav Hundal, lead analyst at Australian cryptocurrency exchange Swyftx, discussed the implications of the increasing M2 money supply on Bitcoin’s prospects. He noted, “In normal times, global loosening measures are a pretty reliable lead indicator for crypto.”
Hundal emphasized that current data indicates active spot buyers and highlighted the U.S. government’s recent decision to raise its debt ceiling by $4 trillion as a significant factor.
The year-on-year fixed exchange rate for the M2 money supply of the four major central banks reached 3.65% in January, according to MacroMicro data. Historically, an increase in the global M2 money supply has been associated with higher Bitcoin prices, driven by enhanced liquidity and reduced interest rates.
Analysts’ Perspectives on Potential Bitcoin Surge
Economist Lyn Alden has previously identified a strong correlation between global M2 money supply growth and Bitcoin’s price movements, noting that Bitcoin aligns with global M2 trends approximately 83% of the time.
Investment research entity Bravo Research highlighted that the U.S. money supply has doubled over the past decade, suggesting that this liquidity surge could fuel a parabolic rise in Bitcoin’s value.
Summary
- The global M2 money supply is expanding, a trend historically linked to Bitcoin price surges.
- Analysts warn against over-reliance on M2 growth but acknowledge its potential impact on Bitcoin.
- Swyftx lead analyst Pav Hundal notes that liquidity expansion often benefits crypto markets.
- The U.S. debt ceiling increase by $4 trillion is seen as a contributing factor to rising liquidity.
- The year-on-year M2 growth rate reached 3.65% in January, suggesting increased market liquidity.
- Economist Lyn Alden found Bitcoin follows M2 money supply trends 83% of the time.
- Research firm Bravo Research highlights that U.S. money supply has doubled in a decade, potentially fueling Bitcoin’s next rally.
- While bullish sentiment grows, some experts caution that other macroeconomic factors must be considered before predicting a parabolic rise.
