Bitcoin's Price is Changing its Tune
For a long time, many crypto analysts have believed that Bitcoin's price is heavily influenced by the global money supply, specifically something called M2. M2 is a measure of the total amount of money circulating in the world, and the idea was that as M2 increased, more money would flow into investment assets like Bitcoin, causing its price to rise.
However, a recent analysis from Colin Talks Crypto suggests this relationship is starting to break down. The strong correlation between Bitcoin's price and global M2 has dramatically weakened over the past few months. In fact, it's at its lowest point since the Bitcoin spot ETFs were launched in January 2024.
This isn't necessarily surprising. As the analysis points out, Bitcoin and M2 have historically diverged right as the crypto market reached its peak during past bull cycles. While the correlation might return during Bitcoin's next major price increase, it's not a guarantee.
This decoupling adds a new challenge for investors who have been relying on the M2 correlation as a key part of their investment strategy. The shift is also reflected in other areas. For example, Bitcoin's correlation with the Nasdaq has also turned negative, meaning they are now moving in opposite directions. While stocks (like the S&P 500) and gold have been hitting new highs, Bitcoin has remained relatively stagnant.
On chain data confirms this trend. The "Trend Accumulation Score by Cohort" chart shows that most Bitcoin investors are either selling or holding, but not actively buying. This indicates that buying pressure has eased, and the market is currently in a "neutral to distribution" phase, where more people are selling than accumulating.
Do you want to know more about what a "bull cycle" is or how to interpret onchain data?
