Bitcoin price experts forecast a potential plunge to $20,000, following its steep 15% correction in mid-December—the largest since August—Bitcoin faces mounting pressure from global macroeconomic factors. Both external and internal forces are at play, shaping the trajectory of Bitcoin’s value as 2024 approaches.
The first warning sign is a drastic contraction in global money supply (Global M2). This vital metric, which tracks cash, deposits, and liquid assets worldwide, has shown a strong correlation with Bitcoin prices. According to analysts, further reductions in Global M2 could extend Bitcoin’s downward trend.
Global Money Supply Hits Bitcoin Hard
Global liquidity has seen a sharp decline over the past two months, with Global M2 shrinking by a staggering $4.1 trillion. As of October, the global money supply hit an all-time high of $108.5 trillion, coinciding with Bitcoin prices reaching $108,000. However, by December, the money supply dipped to $104.4 trillion—the lowest since August.
“The data suggests a potential lagged relationship between Bitcoin prices and Global M2,” says The Kobeissi Letter. “If this correlation holds, Bitcoin could fall as much as $20,000 in the coming weeks.”
Such predictions aren’t new. Joe Consorti, Head of Growth at Bitcoin custody firm Theya, forecasted a 20%-25% Bitcoin correction based on liquidity trends. His prediction seems to be materializing as Bitcoin grapples with these tightening conditions.
A Balancing Act: Illiquid Supply Offers Hope
While macroeconomic forces weigh heavily on Bitcoin, internal dynamics provide a glimmer of hope. André Dragosch, Head of Research at Bitwise, emphasizes the role of Bitcoin’s illiquid supply in stabilizing prices.
“Bitcoin’s illiquid supply has grown significantly, with long-term holders keeping their assets off exchanges,” Dragosch explains. “This phenomenon reduces sell-side pressure, potentially cushioning Bitcoin from the full brunt of external shocks.”
This internal factor is critical as liquidity tightens further in the United States and other major economies. Dragosch believes this trend may offset some of the downward pressure stemming from global macroeconomic challenges.
Correlation Between Global Liquidity and Bitcoin
Bitcoin’s close relationship with liquidity trends isn’t a new phenomenon. Historically, cryptocurrencies have responded to changes in financial conditions, especially shifts in the availability of money.
As The Kobeissi Letter highlights, “Bitcoin’s price movements tend to lag behind changes in global liquidity by approximately 10 weeks. With Global M2 contracting, Bitcoin’s current trajectory aligns with past patterns.”
This insight underscores the importance of monitoring liquidity data for accurate Bitcoin price predictions.
Joe Consorti reiterates his cautious stance, stating, “Bitcoin’s recent price action aligns with our earlier forecast. While internal factors like illiquid supply offer some resistance, the external macro forces are too significant to ignore.”
Similarly, Dragosch predicts a prolonged period of volatility. “Bitcoin may remain under pressure well into 2024, especially if liquidity conditions don’t improve,” he warns.
However, not all analysts share the bearish outlook. Some argue that Bitcoin’s resilience as a decentralized asset could see it outperform traditional markets despite liquidity challenges.
The Road Ahead: Will Bitcoin Fall Further?
Bitcoin price prediction for early 2024 hinges on a complex interplay of global and internal factors. The $20,000 warning isn’t guaranteed, but the risks are undeniable.
For investors, understanding these dynamics is crucial. As liquidity tightens globally, Bitcoin’s illiquid supply growth and decentralized nature could be pivotal in shaping its future.
Whether Bitcoin reaches $20,000 or finds support at higher levels, the coming weeks will be critical in determining its next move.
Bitcoin price prediction remains a hot topic as analysts weigh macroeconomic pressures against internal dynamics. While experts warn of a possible drop to $20,000, Bitcoin’s growing illiquid supply offers hope for stabilization.
As 2024 unfolds, all eyes will be on global liquidity trends and Bitcoin’s response. Investors must stay informed and agile, navigating the uncertain terrain of cryptocurrency markets.
Bitcoin price prediction will continue to dominate headlines, making it essential to track developments closely. Whether it’s a $20,000 dip or a surprising recovery, the crypto market is poised for an eventful year ahead. Get more from The Bit Gazette
