Bitcoin is back in the red at press time, looking at the performance on the daily chart. After an unexpectedly bullish September bar close, the coin started off on a weaker footing in October, falling nearly 5% from the $65,000 and $66,000 resistance areas.
Will Bitcoin follow M2 global money supply growth to $90,000?
Despite the downturn, traders are confident about what lies ahead, and expect the currency to improve and record an increase. In a post on X, one analyst He predicts Bitcoin will reach $90,000 in the next two months, especially if it continues to track the trend of the global money supply M2.
In the analyst’s results, the global money supply M2 is directly related to Bitcoin prices. This means that whenever there is an uptick in the global money supply, Bitcoin prices also rise.
Currently, global liquidity is on the rise. Therefore, if the previous correlation leads to this, there is a high probability that the coin will not only surpass its March highs, but also rise to $90,000, according to the analyst’s forecast.
Currently, the local resistance area lies at the September 2024 highs at around $65,000 and $66,000. If the bulls return, lifting sentiment and prices, Bitcoin could rise.
In the short term, there is strong resistance between $70,000 and $72,000. A break above this level could trigger a short squeeze that could see the world’s most valuable currency break above its March highs.
China leads global liquidity, and the Federal Reserve plans further declines in interest rates
While technical considerations may support Bitcoin bulls, analysts are closely monitoring the global M2 money supply. In a post on X, one observer He explains Global liquidity is rising partly due to the weakness of the US dollar.
As expected, whenever the money supply in Japan, China, or even the European Union increases in US dollars, the value of the US currency tends to fall, leading to a change in the valuation of the global money supply M2.
The analyst says that the rise in global liquidity in recent weeks is primarily due to monetary policy changes in China. The People’s Bank of China cut interest rates and plans to pump billions to stimulate the economy.
The M2 money supply is larger than that of the United States in terms of US dollar terms. Thus, it is the main driver of the M2 global money supply expansion.
With the US Federal Reserve easing after suppressing M2 money supply growth from 2022 to curb runaway inflation, Bitcoin and riskier assets are likely to benefit.
After cutting interest rates by 50 basis points in September, Jerome Powell, Chairman of the Federal Reserve, did just that Hint The central bank may reduce interest rates further in the fourth quarter of 2024.
Featured image from Canva, chart from TradingView