Bitcoin Faces Potential Further Decline as Global Liquidity Dips

Last week Bitcoin experienced its most significant weekly price drop since August, with a 15% correction.

Analysts suggest that global macroeconomic pressures played a major role in this decline, raising concerns that Bitcoin could face further losses if these conditions worsen.

However, Bitcoin also has internal factors that could provide some resilience in the face of external challenges. One key aspect is the changing dynamics of global liquidity. Recent data reveals that global money supply, or Global M2, has seen a sharp drop of $4.1 trillion over the past two months.

Is Bitcoin overdue for a correction?

In the past, #Bitcoin prices have followed global money supply with ~10 week lag.

As global money supply hit a new record of $108.5 trillion in October, Bitcoin prices reached an all-time high of $108,000.

Over the last 2 months, however,… pic.twitter.com/i80ym4Wu7F

— The Kobeissi Letter (@KobeissiLetter) December 21, 2024

This metric, which tracks the total money supply in circulation worldwide, has been closely correlated with Bitcoin’s price movements. Historically, Bitcoin’s price tends to follow changes in the Global M2 with a delay of about 10 weeks, and experts warn that if the decline in global liquidity continues, Bitcoin prices may face additional downward pressure.

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As the money supply fell from a record high of $108.5 trillion in October to $104.4 trillion in December, Bitcoin’s price also retreated, leading some to predict that the cryptocurrency could drop further—by as much as $20,000 in the coming weeks.

Alexander Stefanov