Bitcoin could face a $20,000 drop as the global money supply shrinks

Bitcoin’s 15% correction during the third week of December represented the largest weekly price decline since August. Experts attribute this decline to the impact of global macroeconomic factors, warning that Bitcoin may see a further decline if these pressures intensify.

However, Bitcoin also has internal factors to offset the negative macroeconomic impact.

Global liquidity has decreased over the past two months

According to Kobesi’s letter, Bitcoin price has historically shown a 10-week lag correlation with the global money supply (Global M2). Over the past two months, global M2 has fallen by $4.1 trillion, indicating potential further declines in Bitcoin prices if this trend continues.

Global M2 is a key economic metric that measures the total supply of money in the global economy, including cash, demand deposits (M1), time deposits, and other liquid assets. Fluctuations in Global M2 often affect stock and cryptocurrency markets.

“With the global money supply reaching a new record high of $108.5 trillion in October, Bitcoin prices reached an all-time high of $108,000. However, over the past two months, the money supply has fallen by $4.1 trillion, to $104.4 trillion. Dollar, the lowest level since August If the relationship remains in place, this indicates that Bitcoin prices may fall by up to $20,000 over the next few weeks anticipation.

a month ago, atmosphere Consorti, head of growth at bitcoin custodian Theya, Bitcoin Correction Possible 20%-25% Warned Based on similar indicators. It seems that these expectations are beginning to come true.

Andrei Dragosh, head of research at Bitwise, shares a similar view. Bitcoin is expected to remain lower Pressures due to scarcity of liquidity In the United States. However, it highlights Bitcoin insider This could counterbalance the pressure on liquidity: the increasing illiquid supply of Bitcoin.

A rise in illiquid supply indicates increasing scarcity of Bitcoin, which could support its price given supply and demand dynamics.

“Bitcoin is currently balancing the odds of a) increasing macro headwinds from declining US and global liquidity and b) persistent on-chain tailwinds caused by a strong Bitcoin supply deficit. Ultimately, the on-chain bullish factors will likely outweigh the Overall bearish, but this will likely create some of it Volatility Early 2025 (and perhaps some attractive buying opportunities).” – Andrei Dragosh Comment.

At press time, Bitcoin is trading at around $94,000, BeInCrypto data shows It fell nearly 6% over the weekend.