Bitcoin’s close correlation with the global M2 money supply and the recent downturn in M2 signal a 20-25% correction ahead for BTC price.
With a lag of around 70 days, BTC price is at risk of following global liquidity trends, warning investors to stay cautious.
Macro Liquidity Signals Potential BTC Price Decline
Joe Consorti‘s analysis shows a clear correlation between Bitcoin’s price and the global M2 money supply, with Bitcoin trailing the M2 movements by roughly 70 days since September 2023.
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The implication is that the trend in BTC price is very much under the influence of global liquidity conditions, expressed in the M2 money supply.
Given the correlation, one can anticipate some delay in the movement of Bitcoin after M2 hits. As of now, M2 continues to spiral downward, Bitcoin could display a correction of 20–25%.
Notably, global monetary conditions, liquidity, and interest rate trends could have first-order implications on the price of Bitcoin.
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Elevated P/L Ratio Warns of an Overheated Market and the Risk of Correction
The Bitcoin Realized Profit/Loss P/L ratio is at historical highs, suggesting that the market is overheating. This metric tells us how much Bitcoin profited or lost and helps us learn about market sentiment.
A spike in the realized P/L ratio can generally indicate unusually high levels of realized P/L on the investor side. That usually corresponds to a large number of investors taking profits after a large price increase, often at market peaks.
With the P/L ratio at its current elevated levels, it means the majority of investors are cashing out. This is a sign that the current bullish momentum in the market has ended.
Such behavior often signifies a market top, and cooling of demand may imply a price correction.
Historically, BTC price increases have been preceded by similar increases in the P/L ratio, which fall equally sharply in Bitcoin price.
Therefore, Bitcoin’s price could soon begin to be pressured downward, which could mean that the market is heading towards a turning point.
Record Active Addresses Signal Rising Interest in Bitcoin Adoption
The number of Bitcoin’s daily active addresses hit a 11-month high of 1.27 million. The increase in active addresses is signaling a massive spike in on-chain activity, implying a rise in network participants.
Active addresses tend to spike during such periods if the price is also rising.
This number of active addresses is increasing, which is naturally due to the rise of Bitcoin as not just an investment asset but, quite obviously, in the Bitcoin use case, as a transaction currency. Bitcoinistas often view increased network activity as a positive.
It usually indicates a larger user base, more engagement with the network, and with their investments in Bitcoin.
What’s more, this increase is a sign that there are more users who own and trade Bitcoin than pure speculators. The growth of active addresses despite the volatility could be a signal that Bitcoin’s adoption is accelerating.
BTC Price Faces 6% Pullback, With $85K Key Support in Focus
The 4-hour chart for Bitcoin looks bullish, with BTC price within an ascending channel. However, since we reached the upper boundary of this channel, the price has recently dropped.
It is now testing the support zone around $92,000. However, the Supertrend indicator is still green, meaning a bullish bias is still in place.
A close below this support level could indicate a change in the momentum. The critical support zone is at $86,500-$85,000. The uptrend could resume if we see a bounce here off price support.
The next significant resistance level holds at $98,000, which, on the upside, could propel BTC price toward $100K if broken. The True Range suggested high volatility, so larger price swings could be possible.
During the recent price rise, the volume oscillator at -9.36% indicates declining volume, or weakening upward momentum. The BTC price prediction here is a deeper pullback.
