Bitcoin price has pulled back in the past few days as the recent rally takes a breather and the handle section of the cup-and-handle pattern forms. It pulled back from a high of $111,900 late last month to the current $105,600. This article provides a clear BTC price forecast as the US M2 money supply hits a record high.
US M2 money supply is surging
A potential catalyst for Bitcoin price is known as the M2 money supply. This is a key data that looks at all the cash in circulation, including in checking accounts. It also includes savings deposits, small-denomination time deposits, and money market funds.
The M2 money supply has been in a strong uptrend even as interest rates have remained high. This increase is mostly because of government spending, which has increased after the COVID-19 pandemic. At that time, the government boosted spending to secure the economy.
The M2 supply has also jumped because of the rising public debt, which has jumped to almost $37 trillion. This growth will continue if Congress passes Donald Trump’s Big Beautiful Bill, which is expected to add almost $5 trillion of debt in a decade.
The M2 supply soared after some of Biden’s priorities, including the CHIPS Act and the Inflation Reduction Act (IRA). CHIPS provided billions to incentivize semiconductor companies to build their plants to the US, while IRA provided funds to various clean energy projects.
The growth of the M2 has been moderated by the decision by the Federal Reserve to implement quantitative tightening (QT), which has reduced its balance sheet from almost $9 trillion in 2022 to $6.6 trillion today.
The US M2 has now surged to a record high of $21.8 trillion, a trend that may continue growing over time. Analysts believe that this increase has an impact on Bitcoin price. Fo example, Bitcoin dropped to $15,000 in 2022 as the M2 money supply fell from over $21 trillion to $20 trillion.
How the M2 impacts Bitcoin
The M2 impacts Bitcoin because more money in circulation leads to high inflation and a weaker US dollar. In this case, inflation has remained stubbornly high in the past few years, while the US dollar has softened because of its higher supply.
Analysts believe that the correlation between Bitcoin and the M2 money supply has a 60-90 day lag. As such, if the global M2 surges, one can expect the Bitcoin price to soar after a month or two.
Bitcoin has other bullish catalysts in addition to the M2. For example, it has some of the best supply and demand dynamics. Demand has continued soaring this year, with spot ETF inflows jumping to over $45 billion. More companies like The Blockchain Group, GameStop, and Trump Media starting to buy.
More data shows that the supply of Bitcoin on exchanges has plunged to the lowest level in years. This is a sign that it may keep rising in the near term.
Bitcoin price technical analysis
The daily chart shows that the BTC price has been in an uptrend in the past few months as it moved from a low of $74,380 to an all-time high of $111,900 last month. After failing to form a death cross in April, the coin has constantly remained above the 50-day and 200-day moving averages.
Bitcoin price has formed a cup-and-handle pattern, and is now in the process of forming the handle section. It has also formed a bullish flag pattern, which mostly results into more gains.
Therefore, the BTC price will likely have a strong bullish breakout as bulls target the all-time high of $111,900 followed by $115,000.
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