Bitcoin's Price Stability Linked to Global Liquidity Trends

Bitcoin has been trading within a narrow range recently, fluctuating between $108,000 and $110,000 over the past 24 hours. This stability has persisted despite volatility observed in January and April. Analyst Kyle Chassé notes that Bitcoin's price movements often align with global M2 money supply trends, with a lag of approximately 90 days. By overlaying daily closing prices from the Bitstamp exchange with world M2 data shifted three months back, Chassé demonstrates that Bitcoin tends to rise when global liquidity increases, following a roughly 90-day delay.

Bitcoin first surged above $109,000 in January, then dropped below $75,000 in early April. Since that decline, it has been climbing back towards the $110,000 mark. This pattern suggests a pause in a broader cycle of price fluctuations rather than the end of an upward trend. The global M2 money supply, which stood at about $98 trillion in early 2023, rose to just over $108 trillion by early 2024. Growth then slowed, and Bitcoin spent some time below $80,000. Recently, M2 has surpassed $111 trillion, indicating that Bitcoin's upward potential could extend into mid-2025 as liquidity remains robust.

Chassé predicts that if the global M2 money supply continues to grow, Bitcoin could reach $400,000, representing a roughly 270% increase from its current level of $108,000. He describes this potential rise as "coded," suggesting that it is a predictable outcome based on historical trends. However, other experts caution that money supply is not the sole factor influencing Bitcoin's price. Real interest rates, policy changes, and on-chain signals can also accelerate or decelerate price movements. For instance, if central banks adopt a hawkish stance, higher interest rates could negatively impact Bitcoin, even if M2 continues to rise.

According to reports from Global Macro Investor, global M2 leads Bitcoin by about 12 weeks, providing traders with a rough timeline. If M2 growth significantly slows in the coming months, Bitcoin may stabilize or correct before resuming its upward trajectory. Conversely, any surge in liquidity could pave the way for new highs. While the correlation between money supply and Bitcoin price offers valuable insights, it does not provide precise buy or sell signals. However, understanding that cash growth can flow into crypto after a three-month delay can help investors make more informed decisions about timing their investments.