While the crypto market eagerly awaits Bitcoin (BTC) to break the $100,000 price level, the leading cryptocurrency may have even more room for growth in 2025 as the global M2 money supply grows.
Global Liquidity Wave: A Catalyst for Bitcoin?
In a detailed analysis on
Coutts noted that, after bottoming out at $94 trillion in the fourth quarter of 2022, the global M2 money supply has risen to $105 trillion. Over the same period, Bitcoin’s market capitalization has increased fivefold, from around $400 billion to almost $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 of Bitcoin (gold, stocks, etc. have also absorbed new money). What happens if M2 grows by the usual $30 trillion this cycle?
In particular the global M2 money supply is expected to exceed $127 trillion by 2025 due to global liquidity constraints – an increase of over 18% from the current $107 trillion. Assuming 10% of this increased liquidity – approximately $2 trillion – is captured by BTC, the digital asset’s price could skyrocket by 2025.
To make his argument, Coutts shared the following chart comparing the Federal Reserve’s balance sheet expansion, US M2 money supply growth, changes in US real wages, and Bitcoin’s price movement. The data shows that BTC has significantly outperformed other instruments, especially as the US dollar depreciates as supply increases.
Mixed views on the correlation between Bitcoin and money supply
While some analysts foresee Bitcoin benefiting from the growing money supply, opinions vary on the strength of this correlation. The global M2 money supply, which includes all cash and short-term bank deposits, is expected to peak in January 2026 before shrinking to $118 trillion later that year. Along this trajectory, Bitcoin could potentially reach $150,000.
Crypto analyst Joe Consorti, on the other hand warned that BTC’s correlation with the global M2 money supply could reduce it by 20% to 25%, all the way to $70,000. In response, entrepreneur David Quintieri said BTC is too volatile to be tracked in any meaningful way.
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, to rise institutional adoption and the victory of pro-crypto Donald Trump in the November elections.
Against such a bullish backdrop, it’s not surprising to see ambitious BTC price targets are shared by institutional investors. BTC is trading at $97,944 at the time of writing, up 3.1% in the last 24 hours.
Featured image from Unsplash.com, charts from X.com and TradingView.com