Largest Weekly BTC Decline Since August: Global Money Supply Trends Signal More Pain Ahead

Largest Weekly BTC Decline Since August: Macroeconomic Trends Suggest Further Declines

The third week of December saw Bitcoin’s biggest weekly price decline since August, with a 15% retreat. Experts blame the drop on the influence of global macroeconomic issues but caution that if these forces increase, Bitcoin may see additional declines. To offset the detrimental effects of the macro, Bitcoin also has internal factors.

The Kobeissi Letter claims that there has traditionally been a 10-week lag between the price of Bitcoin and the Global Money Supply (Global M2). Global M2 has dropped $4.1 trillion in the last two months, suggesting that if the trend continues, Bitcoin prices may drop even more.

As global money supply hit a new record of $108.5 trillion in October, Bitcoin prices reached an all-time high of $108,000. Over the last 2 months, however, money supply has dropped by $4.1 trillion, to $104.4 trillion, the lowest since August. If the relationship still holds, this suggests that Bitcoin prices could fall as much as $20,000 over the next few weeks.

The Kobeissi Letter

Bitcoin Faces Macro Pressures, but Increasing Scarcity Could Drive Future Gains

Joe Consorti, Head of Growth at Bitcoin custody company Theya, issued a warning a month ago about a possible 20%–25% Bitcoin correction based on comparable data. And it looks like that prediction is coming true. The same is true for Bitwise’s Head of Research, André Dragosch. Given the tighter liquidity in the US, he expects Bitcoin will continue to be under pressure. He does, however, draw attention to an intrinsic Bitcoin factor—the increasing illiquidity of the cryptocurrency’s supply—that might offset this liquidity constraint. Under supply-demand dynamics, a higher illiquid supply suggests greater Bitcoin scarcity, which could raise its price.

Bitcoin is currently balancing the prospects of a) increasing macro headwinds stemming from the decline in US and global liquidity and b) ongoing on-chain tailwinds stemming from the strong BTC supply deficit. Eventually bullish on-chain factors will likely trump bearish macro factors but this will likely create some volatility in early 2025 (and possibly some attractive buying opportunities) Dragosch

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