Bitcoin, often regarded as the benchmark cryptocurrency, has seen a notable resurgence in its price, with an increase of 8% from a recent low of $76,703 recorded on March 11, 2024. This upswing can be attributed to a rise in purchasing activities by larger investors—often referred to as “whales”—who have been engaging in aggressive buying strategies, including the use of leverage to enhance their positions.
A key indicator of this bullish sentiment has been the significant increase in margin long positions on Bitfinex, a major cryptocurrency exchange. Over a span of 17 days, these positions surged by 13,787 BTC, reaching a substantial valuation of approximately $5.7 billion. This elevated level of leveraged positioning is indicative of a strong confidence among investors in Bitcoin’s potential for further appreciation, despite some recent fluctuations in its price.
The relationship between Bitcoin’s price movements and the global monetary base is a topic of ongoing analysis among financial experts. Some analysts suggest a strong correlation exists, positing that Bitcoin’s value typically rises in tandem with increases in liquidity provided by central banks. Given the increasing concerns surrounding a potential recession, there is growing speculation that central banks may adopt more expansionary monetary policies aimed at bolstering the economy. If this hypothesis holds true, the current positioning of Bitfinex whales could place them in an advantageous position to capitalize on a substantial rally, with some predicting possible new price heights surpassing $105,000 within the next two months.
A recent post by a user named Pakpakchicken on social media highlighted a remarkable 82% correlation between the global money supply, measured by the M2 aggregate, and Bitcoin’s price movements. This insight aligns with historical patterns, where a tightening monetary policy—evident through raised interest rates or reduced bond holdings—has tended to render traders more risk-averse, thereby leading to diminished demand for Bitcoin. Conversely, bullish market dynamics often arise during periods of monetary easing, fostering increased investor interest in the cryptocurrency.
During a particularly tumultuous period in early September 2024, Bitfinex margin traders significantly added to their long positions, accumulating 7,840 BTC even as Bitcoin struggled to surpass the $50,000 mark for an extended period. Despite the prevailing downward pressure, these whales maintained their positions, ultimately witnessing Bitcoin’s price climb past $75,000 shortly thereafter. This scenario coincided with a notable bottoming out of the global M2 money supply, further substantiating the correlation between liquidity measures and Bitcoin’s market performance.
While it can be challenging to delineate a direct cause-and-effect dynamic between the money supply and investor sentiment towards Bitcoin, various prominent events have played a critical role. A prime example is the election of former President Donald Trump in November 2024, which spurred a significant Bitcoin rally, fueled not only by his administration’s favorable stance towards cryptocurrencies but also by shifting prevailing market conditions.
In addition to macroeconomic trends, company-specific developments have potential implications for Bitcoin’s trajectory. One notable initiative comes from Michael Saylor, the co-founder of MicroStrategy, who is reportedly exploring avenues to raise up to $21 billion to further bolster MicroStrategy’s Bitcoin holdings. This strategy is designed to reinforce the company’s position as the largest corporate Bitcoin holder, with an acquisition total of 499,096 BTC at an investment cost of roughly $33.1 billion. Saylor’s move could alter market dynamics even in light of broader trends, including recent net outflows of approximately $4.1 billion from Bitcoin spot exchange-traded funds (ETFs) since February 24, 2024.
While the expansion of the global money supply has likely played a role in bolstering margin longs on Bitfinex, Bitcoin’s pursuit of a price point near $105,000 may be more significantly influenced by specific industry news and regulatory developments. For instance, reports from the Wall Street Journal indicate discussions involving representatives of Donald Trump regarding a potential investment stake in Binance, a leading cryptocurrency exchange. Such developments point towards a growing inclination among major figures in the financial and political arenas to embrace crypto assets.
However, the impacts of a more crypto-friendly U.S. administration have yet to deliver tangible benefits to the market. For example, the Office of the Comptroller of the Currency (OCC) has not yet provided clarity on whether banks may custody digital assets and manage stablecoins without prior authorization. Similarly, the acting SEC chairman has indicated intentions to eliminate crypto-specific provisions in a proposed regulatory rule, allowing for broader exchange definitions.
The U.S. Securities and Exchange Commission (SEC) is currently in the process of reviewing requests submitted by issuers of spot Bitcoin ETFs seeking to permit in-kind creations and redemptions. This shift would allow for shares to be exchanged directly for Bitcoin, deviating from the traditional cash-based exchange methods and potentially enhancing market fluidity.
Amidst these regulatory discussions, the prevailing global macroeconomic landscape has shown signs of deterioration, exerting downward pressure on Bitcoin’s price. However, these same conditions are likely to prompt governments to reconsider their economic stimulus strategies, potentially leading to an expansion of the M2 money supply.
Should the current trends continue, the conditions may indeed align favorably for Bitcoin to approach Pakpakchicken’s price target of $105,000 by May 2025, with the potential for even greater appreciation as market dynamics evolve.
It’s important to note that while the insights provided in this analysis can help inform investment decisions, they are intended for general informational purposes and should not be construed as financial or investment advice. The market for cryptocurrencies remains volatile and subject to rapid change, underscoring the importance of conducting thorough research and consulting with financial professionals before making significant investment decisions.