Bitcoin Surges 4% to $104,000 on US-China Trade Talks

Bitcoin recently surged past the $100,000 mark, reaching a high of $104,000 before stabilizing around $103,000. This surge followed news of potential trade talks between US and Chinese officials, which sparked market optimism and drove Bitcoin's price upward. However, analysts are focusing on a broader trend: the global money supply, or M2, as a key indicator of Bitcoin's future performance.

Julien Bittel, a macro researcher, posits that global M2 money supply is a leading indicator for Bitcoin's price movements. According to Bittel, there is typically a 12-week lag between an increase in M2 and a corresponding rise in Bitcoin's price. This theory suggests that when global liquidity increases, Bitcoin follows suit approximately three months later.

From early 2023 to early 2024, global M2 rose from $98 trillion to over $108 trillion, coinciding with Bitcoin's break above $100,000. However, mid-2024 saw a pause in M2's growth, which corresponded with Bitcoin's consolidation phase, where its price fell below $80,000. Recently, M2 has resumed its upward trajectory, surpassing $111 trillion, which Bittel interprets as a signal that Bitcoin could continue to rise into mid-2025.

Not all analysts agree with Bittel's timeline. Benjamin Cohen argues that Bitcoin's price movements do not always align with changes in M2. He points out that Bitcoin reached its peaks in 2017 and 2021 before M2 hit its highs, contradicting the theory of a 12-week lag. Cohen suggests that Bitcoin could be leading global liquidity changes, with M2 adjustments following later. If this is the case, the recent rise in Bitcoin's price might indicate an impending decrease in global liquidity.

Cohen also highlights the impact of external events, such as the FTX collapse in 2022, which caused a significant drop in Bitcoin's price despite M2 bottoming out. This event disrupted the typical correlation between M2 and Bitcoin, illustrating that other factors can influence Bitcoin's price movements. Cohen's perspective suggests that the current rally in Bitcoin could be a warning sign rather than an indication of resilience, depending on whether Bitcoin is leading or lagging global liquidity.