Bitcoin’s price could be on the verge of a major Bitcoin’s next rally, and the key lies in something simple: the M2 money supply.
What’s M2?
M2 is all the money floating around in the economy, cash, checking accounts, savings, and other easy-to-spend stuff. Central banks, like the Federal Reserve, control it by printing money or tweaking interest rates. More printing means M2 grows. Less means it shrinks.
Bitcoin Follows M2
Here’s the big deal: Bitcoin’s price moves with M2. When M2 goes up, Bitcoin usually rises. When M2 drops, Bitcoin falls. Studies show a super-strong link, about a 0.94 correlation, which is higher than with stocks or gold. But there’s a catch: Bitcoin lags behind M2 by about 2 months.
For example:
2017 Bull Run & 2018 Crash:
- M2 supply saw steady growth through 2016-2017, fueling BTC’s massive run.
- BTC peaked in late 2017, but as M2 growth slowed in 2018, BTC crashed in early 2018 (2-month delay again).
- BTC bottomed in early 2019, coinciding with an uptick in M2.
2020-2021 Mega Bull Run:
- The COVID-era M2 surge (massive money printing) in early 2020 fueled BTC’s breakout.
- BTC hit 69K in late 2021, but M2 growth slowed in mid-2021.
- Once M2 flattened in 2022, BTC crashed by late 2022.
2022-2023 Bottoming & Recovery:
- M2 started growing again in early 2023, and BTC followed with a recovery by mid-2023.
- M2 continued its slow increase, leading to BTC’s recent strength.
This 2-month delay has happened over and over in the past.
What’s Happening Now?
Lately, M2 was shrinking, and sure enough, Bitcoin’s been in a downtrend. But here’s the good news: M2 is starting to grow again. If the pattern holds, Bitcoin could turn bullish soon. Maybe bottoming in April
Source | bitcoincounterflow
Why This Works
When M2 grows, more money floods the system. People get scared of inflation, their cash losing value. Bitcoin, capped at 21 million coins, looks like a solid way to protect wealth.
It’s Not Perfect
Sometimes Bitcoin ignores M2. Big crypto news, like hacks or new laws, can throw it off. Plus, Bitcoin’s price swings like crazy, so skeptics say it’s too wild to follow M2 perfectly. Fair point, but the link still holds strong most of the time.
The Bottom Line
M2 is growing again. History shows Bitcoin’s downtrend follows M2’s dips with a 2-month delay, and its uptrends follow M2’s rises too. If that keeps up, Bitcoin could be gearing up for a big jump. Watch the money supply. It might just tip you off to Bitcoin’s next move.
This article is our editor’s opinion, not financial advice. Please do your own research DYOR before making any moves.
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