Accumulating Global Funds Indicates Potential Growth for Bitcoin

In a remarkable turn of events, the latest M2 money supply data reveals a new record high of nearly $112 trillion, as of September 2. This surge comes amidst a global economic landscape reshaped by the COVID-19 pandemic, with the US Federal Reserve leading the charge to inject unprecedented liquidity into the world economy.

In response to the pandemic, the Fed lowered interest rates from 2% to 0% and flooded the economy with liquidity. This move, aimed at stimulating economic growth, has resulted in an increase in global liquidity, indicating that significant central banks are enhancing the availability of funds within their respective nations.

The connection between the growth of money supply and the price movements of Bitcoin has resurfaced as a significant indicator. An analysis of the price movements of BTC in relation to the M2 growth rate of central banks reveals a correlation. Historically, Bitcoin has followed a pattern in respect to US and global M2 supply with a lag of three to six months, especially during times of liquidity shifts.

This expansion of liquidity has a direct correlation with Bitcoin's price. The M2 money supply has risen over the last two years, coinciding with a rise in Bitcoin's price to new highs. The crypto market has typically responded positively to interest rate cuts by the Fed, and speculation about potential rate cuts is growing, which might significantly impact the money supply (M2) and the crypto market.

Several experts have forecasted that the price of BTC could hit the $150,000-$200,000 range by the end of 2025, driven by higher liquidity and increasing institutional demand. The increase in institutional demand, coupled with the recent infusion of capital, has analysts predicting that Bitcoin's price will rise, potentially causing the cryptocurrency market as a whole to trend positively.

It's worth noting that Bitcoin's reaction to fluctuations in liquidity can sometimes be more dramatic than that of traditional hedges like gold. The last country where the record high level of M2 total liquidity was renewed is the United States. In April 2021, a noticeable divergence emerged between the dollar and Bitcoin, potentially signaling the onset of a fresh upward movement for Bitcoin.

The total amount of money in circulation, or worldwide liquidity, encompasses cash, check deposits, savings accounts, market accounts, funds, and deposits below $100,000. The expansion of the money supply (M2) during 2016-18 resulted in an upswing in Bitcoin's price. Bitcoin exhibits a robust long-term relationship with liquidity.

As we move forward, it will be interesting to see how the ongoing expansion of the money supply will continue to impact the price of Bitcoin and the broader cryptocurrency market. The correlation between the two is a significant development that could shape the future of digital currencies.