Bitcoin’s Price Faces Pressure Amid Global Money Supply Decline
Bitcoin experienced a notable decline of 15%, attributed to macroeconomic pressures and a drop in Global Money Supply. Analysts predict potential further losses, with prices possibly lowering by as much as $20,000. However, the increase in Bitcoin’s illiquid supply may counterbalance some of these effects, creating volatility in the near future while providing buying opportunities.
Recent market developments indicate Bitcoin experienced a significant correction, declining 15% during the third week of December, the largest weekly drop since August. Experts suggest that this downturn is largely due to adverse macroeconomic conditions that may continue to pressure Bitcoin prices. Nevertheless, analysts also point out that internal factors specific to Bitcoin may mitigate some of this negative impact.
Over the last two months, the global money supply, referenced as Global M2, has decreased by $4.1 trillion, a notable shift that may influence Bitcoin’s value. Historically, Bitcoin has demonstrated a correlation with Global M2, and as this metric has now fallen to $104.4 trillion from a peak of $108.5 trillion, predictions indicate there could be additional declines in Bitcoin’s price, potentially as much as $20,000 in the forthcoming weeks.
This correlation was highlighted by The Kobeissi Letter, which noted, “If the relationship still holds, this suggests that Bitcoin prices could fall as much as $20,000 over the next few weeks.” Additionally, Joe Consorti, Head of Growth at Theya, had previously warned of a potential correction in Bitcoin of 20% to 25%, a forecast that appears to be unfolding.
From a research perspective, André Dragosch of Bitwise states that while the tightening liquidity conditions, particularly in the U.S., will exert downward pressure on Bitcoin, the growth in its illiquid supply could offer some support. This increase in scarcity is anticipated to have beneficial long-term effects on the currency’s price.
Mr. Dragosch remarked, “Bitcoin is currently balancing the prospects of a) increasing macro headwinds stemming from the decline in US and global liquidity and b) ongoing on-chain tailwinds stemming from the strong BTC supply deficit. Eventually bullish on-chain factors will likely trump bearish macro factors but this will likely create some volatility in early 2025 (and possibly some attractive buying opportunities).” As of the latest market information, Bitcoin trades around $94,000, reflecting nearly a 6% decrease over the weekend.
The fluctuations in Bitcoin pricing often correlate with changes in global economic indicators, specifically the Global Money Supply, which is a measure of the total cash and liquid assets available in the economy. The relationship between Bitcoin and macroeconomic conditions, particularly liquidity, is critical for understanding price dynamics in both cryptocurrency and stock markets. Recent declines in Global M2 have raised concerns about the sustainability of Bitcoin’s value, prompting analysis of existing supply dynamics and market reactions.
In summary, the recent 15% drop in Bitcoin’s value signals the complex interplay between global liquidity constraints and internal supply factors. With Global M2 having decreased significantly, there are predictions of a further price decrease, potentially up to $20,000. However, the trend toward an increasing illiquid Bitcoin supply may provide some cushion against these economic pressures, suggesting a nuanced outlook as the market adapts to these conditions.
Original Source: beincrypto.com
Post Comment