Analyst: M2 money supply is a key factor in Bitcoin's next move

Author: Zoltan Vardai, CoinTelegraph; Compiler: Wuzhu, Golden Finance

According to market analysts and historical chart patterns, The growing money supply in the United States may be the key to unlocking more upward momentum for Bitcoin.

M2 Money Supply Growth May Catalyze the Next Bull Run

The M2 money supply estimates all cash and short-term bank deposits in the United States, and its growth has historically been correlated with previous Bitcoin bull runs.

Realvision chief crypto analyst Jamie Coutts wrote in a May 16 article that growth in money supply could be key to the next phase of the Bitcoin cycle upwards:

“This is due to high correlation with BTC bull cycles. Of the three major indicators I track in my Bitcoin/liquidity framework, global M2 seems to capture most of the movement.”

However, according to Coutts, changes in money supply appear to be more important for Bitcoin price than notional value:

“The rate of change of money supply is more important than notional value. This chart confirms what our MSI performance chart indicates: Bitcoin generally moves with changes in M2 momentum.”

12-month M2 money supply, source: Jamie Coutts

In early May, M2 money supply turned positive year-on-year for the first time since November 2023, suggesting that investors may soon start looking for inflation hedges such as Bitcoin.

Coutts said that the dollar’s ​​price action could be another catalyst for Bitcoin’s price if it falls below the 101 mark:

“The dollar is range-bound. A break below 101 would be rocket fuel for Bitcoin.”

U.S. Dollar Index. Source: Jamie Coutts

Popular cryptocurrency analyst Rekt Capital said Bitcoin broke a month-long daily downtrend on May 16, writing to his 468,000 followers in an X post:

“Bitcoin has broken the daily downtrend that started in mid-April a month ago. When a downtrend is broken, an uptrend emerges. Bitcoin has finally recorded its first higher since bottoming at $56,000.”

BTC/USD, 1-day chart. Source: Rekt Capital

On the four-hour chart, Bitcoin price has broken out after a nearly five-week downtrend that began on April 8.

BTC/USD, 4-hour chart. Source: TradingView

However, Bitcoin’s relative strength index (RSI) peaked at 77 on May 16 before falling back to its current level of 66. While this suggests that Bitcoin is trading at a fair value, it may need to fall to around 50 before Bitcoin price has more upward momentum. BTC/USD, 4-hour chart. Source: TradingView The RSI is a popular momentum indicator used to measure whether an asset is oversold or overbought based on the magnitude of recent price changes. Bitcoin price faces significant resistance at the $66,500 mark. According to Coinglass, the above move could liquidate more than $111 million worth of leveraged short positions across all exchanges.

Bitcoin exchange liquidation chart. Source: Coinglass