Crypto market cycle and the connection to the money supply
The historical crypto market cycle has been closely linked to the M2 money supply and increasing liquidity.
On October 22, the market analyst investigated Michael van de Poppe Data points and correlations with cycle peaks and the money supply. He noted that the M2 money supply continued to rise sharply in 2017 and the cycle continued until the end of the year, with BTC reaching a peak of $20,000.
During the bull market in 2021, the M2 money supply skyrocketed, and crypto markets followed this trend, peaking in November of the same year. The money supply continued to grow in 2022, but markets remained under pressure this year due to interest rate hikes and the collapse of several leading cryptocurrency companies.
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Effects of the money supply
The analyst predicted that the crypto market cycle would lengthen if the M2 money supply expanded for another year and a half. The general thesis is that if the M2 money supply expands through mid-2026, liquidity expansions are likely to lengthen the cycle.
The money supply M2 is a measure of the amount of money in circulation. It includes the money supply M1, ie physical cash and deposits, as well as “less liquid” types of cash. She grows currently at a rate of 2.56%, just above the US inflation rate of 2.44%. It has also risen since the beginning of the year and is falling Declarations the Fed in St. Louis currently stands at $21.2 trillion.
Market strategist Charlie Bilello commented the growth rate with the words:
After a short break, money printing is back.
On October 23rd shared WeRate co-founder Quinten Francois also shared the M2 growth chart and said:
A tsunami of printed money will come and push BTC into six figures.
Where to go in the short term?
BTC has fallen about 3% since its multi-month high of $69,500 on October 21 and is now trading around the $67,000 level, where support continued in Asian trading on Wednesday morning.
Reflexivity Research co-founder Will Clemente, noticedthat Bitcoin is converting last month’s highs into demand, suggesting it could form a new support base to move higher. Meanwhile, “Daan Crypto Trades” told his 389,000 ETF inflows continue.