Bitcoin and the World’s Money Supply: What’s the Connection?
Ever wonder what makes Bitcoin’s price go up and down? It’s not just random! Some experts believe there’s a connection between Bitcoin’s price and something called the global M2 money supply. Don’t worry, we’ll break that down.
What is the Global M2 Money Supply?
Think of the global M2 money supply as the total amount of readily available money circulating in the world’s economy. It includes things like cash, checking accounts, and easily accessible savings accounts. When this amount increases, it generally means there’s more money floating around.
The 90-Day Lag: Bitcoin’s Reaction Time
Here’s where it gets interesting. Some analysts believe that Bitcoin’s price tends to follow changes in the global M2 money supply with a delay of about 90 days. This means that if the global M2 money supply increases, Bitcoin’s price might go up roughly three months later.
So, why might this happen? The theory is that when there’s more money available, people might be more inclined to invest in things like Bitcoin. It’s like having extra pocket money – you might decide to buy something a little risky, like a cryptocurrency!
Is Bitcoin About to “Rip”?
Recently, the global M2 money supply has been increasing. This has some Bitcoin enthusiasts excited, thinking that Bitcoin’s price is about to “rip” (meaning increase rapidly). They see the historical pattern and believe it’s a sign of good things to come.
Not a Perfect Relationship
However, it’s important to remember that this relationship isn’t a guarantee. There are many other factors that can influence Bitcoin’s price, such as:
- News and Events: Major announcements or events in the crypto world can cause prices to fluctuate.
- Regulations: Government regulations regarding cryptocurrencies can have a big impact.
- Market Sentiment: How people generally feel about Bitcoin (positive or negative) can also play a role.
My Take on This
While the connection between global M2 and Bitcoin’s price is an interesting observation, it’s crucial not to rely solely on this single factor for investment decisions. The crypto market is complex and volatile, and it’s always best to do your research and consider various perspectives before making any moves. It is a fascinating connection, though, and one that I will definitely be watching.
This article is based on the following original source, reinterpreted from a beginner’s perspective:
Global M2 money supply shifted by 90 days predicts Bitcoin
price but with elastic relationship