Hold onto your hats, crypto enthusiasts! Recent research has unveiled a fascinating connection between Bitcoin prices and global money supply, and it's a wild ride.
On September 25, Lyn Alden, the brain behind Lyn Alden Investment Strategy, dropped some intriguing findings from her latest research paper. This paper dives deep into how global money creation stacks up against other asset classes.
Here's the kicker: Bitcoin tends to move in sync with the global money supply (M2) a whopping 83% of the time, more than any other asset out there. The research paints Bitcoin as a sort of “liquidity barometer,” reflecting the ebb and flow of global cash.
When global liquidity swells, Bitcoin prices generally shoot up. Conversely, when liquidity tightens, Bitcoin takes a dip. Over a study period stretching from May 2013 to July 2024, the research found a jaw-dropping correlation coefficient of 0.94 between Bitcoin and global liquidity. Talk about being in lockstep!
M2 money supply, for the uninitiated, includes cash, checking deposits, and those easily accessible savings. Think of it as the lifeblood of the economy, influencing everything from inflation to interest rates and overall economic mojo.
Lyn Alden pointed out that while stocks have earnings that can mess with their correlation and gold acts defensively, Bitcoin behaves like a “risk-on gold.” In simpler terms, it's got the highest correlation to global liquidity among the big players.
The research highlighted that Bitcoin's strong link with global liquidity is partly due to its high volatility, which can skew shorter-term correlations. But overall, this makes Bitcoin a valuable “macroeconomic barometer” for the savvy investor.
In essence, think of Bitcoin as a mirror, reflecting the pace of global money creation and the relative strength of the dollar.
Earlier this year, Lyn Alden boldly predicted that Bitcoin prices could skyrocket to $200,000 within two years. And if that doesn't get your heart racing, check this out: market analyst ‘Game of Trades' recently told his 247,000 X followers that the M2 money supply is back on the rise after hitting its deepest contraction since 1960.
According to the St. Louis Federal Reserve, the M2 money supply started contracting in March 2022 but began bouncing back in March 2024. It's now sitting at a hefty $21.17 trillion in the U.S., up 2% over the past six months.
The implications for Bitcoin prices? Extremely bullish! Many analysts are gearing up for a crypto market bull run to kick off in the fourth quarter. So, buckle up and get ready for the ride!
