The Impact of Global Money Supply on Bitcoin: An In-Depth Analysis
In the last decade, the global money supply has expanded by an astonishing $50 trillion. This increase has significantly influenced the cryptocurrency market, particularly Bitcoin, which is often viewed as a hedge against inflation. Recently, however, there has been a notable decline in the global money supply. Concurrently, Bitcoin is facing challenges in reaching the significant $100,000 milestone. This raises a crucial question for Bitcoin enthusiasts: Is Bitcoin’s diminishing momentum connected to the falling global money supply? Let’s explore this intriguing correlation in detail.
Recent Trends in Global Money Supply and Bitcoin
At the onset of this period, Bitcoin was valued at approximately $69,542.78. Between November 5 and 22, Bitcoin’s market value surged by over 45.82%, setting a new record high of $98,884.91. Nevertheless, this upward momentum soon began to wane. Between November 24 and 26, the market experienced its first significant correction since November 5, with prices dropping sharply by more than 7.06%. The market has yet to fully recover from this correction, with Bitcoin experiencing a further decline of 0.23% yesterday.
The M2 Growth Year-over-Year (YoY) index, which tracks changes in the money supply, showed a value of 3.19% at the start of the year. By mid-February, it had dipped to -0.18%, before climbing sharply to 2.72% in early March. However, it fell once more to -0.34% by mid-April. From August 5 to September 30, the index saw a significant rise from 4.17% to 7.09%, only to plummet later. As of now, it stands at 1.83%.
Correlation Between Bitcoin and M2 Global Money Supply
Historically, Bitcoin bull markets have often coincided with periods of rising M2 growth. For instance, between February 12 and March 4, the M2 Growth YoY index increased from -0.18% to 2.72%. In mid-March, Bitcoin’s price soared to an all-time high of over $73,000. A decline in the index may suggest limited upside potential for Bitcoin in the near term. Furthermore, lower liquidity can result in increased volatility within the Bitcoin market.
Currently, the M2 Global Supply is approximately $105,087,858,680,803, which is about 2.24% lower than the September 30 figure of $108,024,482,423,918. This correlation between the global money supply and Bitcoin underscores the importance of liquidity trends for traders and investors. As these global financial dynamics continue to evolve, understanding their impact on Bitcoin remains crucial for making informed investment decisions.
In conclusion, while the global money supply plays a significant role in shaping Bitcoin’s market dynamics, other factors also contribute to its performance. As traders and investors navigate this complex landscape, staying informed about the interplay between these elements will be essential for capitalizing on opportunities and mitigating risks.
