Bitcoin recently hit an all-time high of $111,900 but experienced a correction below $110,000. Despite the pullback, analysts suggest the bullish trend remains intact, supported by a strong correlation between Bitcoin's price and the global M2 money supply, which is at a new high. Market sentiment remains cautious, but data indicates potential for further gains toward $130,000 if the trend continues.
The M2 money supply in the US has experienced a significant decline, a rare occurrence not seen since the Great Depression, which historically foreshadows economic trouble. While predicting stock market movements in the short term is challenging, historical data suggests that a contraction in M2 money supply has been associated with periods of depression and high unemployment. However, long-term investors are reminded that economic cycles, including recessions, are normal and have historically been followed by periods of growth. Despite the potential impact on corporate earnings, the long-term resilience of the US economy and stock market suggests that a historic decline in M2 money supply should not be a cause for concern for investors with a long-term horizon.
Bitcoin's failure to move beyond $30,000 decisively has raised concerns of a potential downtrend in Q2. The strengthening negative correlation between Bitcoin and the US dollar index (DXY), which has undergone a rebound, suggests a souring risk appetite would be a boon for the dollar, while increasing the risk of Bitcoin failing to reclaim $30,000 in the short term. Gold's rally has brought its price to an infamous horizontal resistance level near $2,075, which could trigger a sharp bearish reversal phase. A significant move lower in M2 could foreshadow new lows for Bitcoin, which often moves in tandem with US stock indexes. Bitcoin appears to be heading toward the $15,000-$20,000 price range, depending on its potential breakdown point from what appears to be a rising wedge pattern.
