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Analysts Split on Whether Record Money Supply Will Boost Bitcoin
The global and United States money supplies are at record highs, which is typically a bullish sign for Bitcoin markets… or is it?
Crypto analysts have been keenly watching the expansion of the money supply as a crucial indicator for the performance of Bitcoin and other cryptocurrency assets. Traditionally, when central banks print more money, investors are encouraged to seek higher returns in riskier assets such as cryptocurrencies.
Bitcoin markets are aligning with the 100-day offset of the M2 money supply, noted crypto YouTuber Lark Davis on Monday. He predicted a “parabolic move” that could propel the asset to $250,000 over the next few months. However, BTC is actually lagging behind the M2 supply growth at the moment, as it usually does on longer time frames.
Global M2 money supply has hit new all-time highs, while Bitcoin seems to be struggling to keep pace with these levels. This divergence could potentially be a negative sign for Bitcoin investors, suggesting that the asset may not benefit from the increased money creation in the same manner as before.
On the other hand, some analysts continue to support the idea of a strong correlation between M2 and Bitcoin prices. Global Markets Investor observed on Tuesday that the US money supply is “re-surging,” with the M2 money supply jumping 4.5% year-over-year in May to a record $21.94 trillion. This growth has likely surpassed $22 trillion in July as money printing continues, and if this trend is projected over the next decade, the M2 money supply could double.
Not all analysts are convinced that there exists a strong correlation between Bitcoin’s price performance and M2 money supply, however. Protos debunked the notion of a direct correlation between these two metrics on July 7, stating that the relationship breaks down when you simply change the time frame on the charts. When zoomed in from 2021 to the present, the correlation appears strong; yet, it falls apart when seen through a broader lens.
In fact, Protos noted that M2 even hit new highs in November 2022 while Bitcoin crashed during the FTX collapse. This highlights the importance of considering multiple factors before making any investment decisions.
Overall, experts are now divided on whether record money supply will boost Bitcoin’s price and drive its growth.
Source: cryptopotato.com
