While the crypto market eagerly anticipates Bitcoin (BTC) breaking the $100,000 price level, the premier cryptocurrency may have even more room for growth in 2025 as the global M2 money supply expands.
Global Liquidity Surge: A Catalyst For Bitcoin?
In a detailed analysis on X, Jamie Coutts, chief crypto analyst at Real Vision, brought his follower’s attention to the expansion and contraction of the global M2 money supply over the past few years.
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Coutts noted that after bottoming out at $94 trillion in Q4 2022, the global M2 money supply has risen to $105 trillion. Over the same period, Bitcoin’s market capitalization soared fivefold, from approximately $400 billion to nearly $2 trillion at the time of writing. He added:
In other words, 10% of the new money supply has leaked from the fiat system into the emerging global reserve asset of Bitcoin (gold, equities etc have absorbed new money as well). What happens if M2 expands by the usual $30T this cycle?
Notably, the global M2 money supply is projected to surge past $127 trillion in 2025 due to global liquidity concerns – an increase of more than 18% from the current $107 trillion. Assuming that 10% of this increased liquidity – about $2 trillion – is captured by BTC, the digital asset’s price could skyrocket in 2025.
To reinforce his argument, Coutts shared the following chart comparing the Federal Reserve’s balance sheet expansion, U.S. M2 money supply growth, U.S. real wage changes, and Bitcoin’s price performance. The data reveals that BTC has significantly outperformed other instruments, especially as the US dollar depreciates with increasing supply.
Mixed Views On BTC And Money Supply Correlation
While some analysts foresee Bitcoin benefiting from the expanding money supply, opinions differ regarding the strength of this correlation. The global M2 money supply, which includes all cash and short-term bank deposits, is expected to peak by January 2026 before contracting to $118 trillion later that year. Along this trajectory, Bitcoin could potentially reach $150,000.
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In contrast, however, crypto analyst Joe Consorti cautioned that BTC’s correlation with the global M2 money supply could drag it down 20% to 25%, all the way down to $70,000. In reply, entrepreneur David Quintieri said BTC is too volatile to be meaningfully tracked against anything.
2024 has been a pivotal year for the leading cryptocurrency, with the approval of spot Bitcoin exchange-traded funds (ETF) in the US, the Bitcoin Halving, rising institutional adoption, and the victory of pro-crypto Donald Trump in the November election.
Against such bullish backdrop, it’s not surprising to see ambitious BTC price targets being shared by institutional investors. BTC trades at $97,944 at press time, up 3.1% in the past 24 hours.
Featured Image from Unsplash.com, Charts from X.com and TradingView.com