There are signs that Bitcoin (BTC) is headed for potential relief from the selling pressure it has faced in recent weeks. The M2 money supply, a crucial economic indicator, has flipped positive for the first time since November 2022, hinting at a shift in investor sentiment towards assets like Bitcoin.
In addition, prominent crypto market figures including the former BitMEX CEO and the current CEO of Vailshire Capital Management believe Bitcoin has hit bottom and could start seeing a gradual recovery.
M2 money supply points to easing selling pressure
Contrary to the expectation of many, Bitcoin has seen a sharp drop after its halving event. On May 1, 2024, it dropped to a fresh multi-month low below $57K, sending shockwaves across the crypto market, where it acts as a beacon of hope leading the entire pack of cryptocurrencies.
In April, there was a significant outflow of Bitcoin (BTC) across all cohorts according to Glassnode due to consistent selling pressure.
And although its price had recovered to around $59.30K at press time, it was still 10% over the past 30 days.
H1 BTC/USDT price chart
The hourly and daily charts show signs of a possible bullish breakout, supported by the recent developments in the M2 money supply.
The year-over-year M2 money supply, a signal that investors use to start looking for hedges against inflation, on May 1, 2024, turned positive for the first time since November 2022.
The M2 money supply is an estimate of all cash held and short-term bank deposits across the United States. By turning positive it signals an overall increase of money in circulation, which is usually an indicator for investors to turn their focus to assets like Bitcoin that outperform in high inflationary periods.
The positive shift in M2 money supply has prompted crypto traders to speculate on Bitcoin’s price surge, as the supply had been in negative territory since November 2022.
Historically, Bitcoin and the overall crypto market are known to outperform the traditional financial markets with a rise in global M2 supply.
Former BitMEX CEO forecasts a gradual Bitcoin (BTC) recovery
In a blog post on May 3, the former BitMEX CEO Arthur Hayes weighed in on the recent Bitcoin (BTC) market dynamics, asserting that the cryptocurrency has likely hit a local bottom.
Hayes predicts a slow grind higher for Bitcoin over the coming months, with the cryptocurrency expected to rally above $60,000 and then trade within a range of $60,000 to $70,000 until August. He views the recent market correction as a necessary cleansing and anticipates increased dollar liquidity from the Federal Reserve’s quantitative tightening to drive Bitcoin’s gradual uptrend.
The former BitMEX expects crypto markets to slowly grind higher after the recent sell-off, driven by increased dollar liquidity from the Federal Reserve’s quantitative tightening (QT) taper and the U.S. Treasury’s debt issuance plans.
By tapering QT, the Fed effectively injects more liquidity into markets, which could theoretically make its way into riskier assets such as cryptocurrencies, providing buying pressure. Hayes views this as “stealth money printing,” which is positive for high-risk assets.
According to the post, Hayes believes the slow addition of billions of dollars of liquidity each month will dampen negative price movement from here on out. He also went ahead to predict that prices would “bottom, chop, and begin a slow grind higher.”
Jeff Ross, Founder and CEO of Vailshire Capital Management, in a post on X, supported the positive Bitcoin sentiments, stating that he was “still respecting the ongoing bullcrab market” despite the recent downturn. He also added that the Fed’s “rhetoric pivot” signifies a transition from “bad-to-less-bad liquidity conditions.”
Ross went ahead to state that analysts and traders calling for the end of the Bitcoin bull market “may be dismayed to learn that the actual bull market hasn’t even started yet,” and that the coming weeks will be an accumulation opportunity.
Institutional crypto brokerage MatrixPort in a note shared with a prominent media outlet also reiterated its outlook that post-halving, “Bitcoin tends to move sideways afterwards for four to five months based on previous instances.”
While challenges persist, including tax season in the United States and concerns over Federal Reserve decisions, the overall sentiment seems to favour a potential recovery for Bitcoin (BTC) in the months ahead.
Traders and investors should continue to monitor key indicators and market developments for further insights into Bitcoin’s trajectory following the positive shift in the M2 money supply and insights from industry experts like BitMEX CEO Arthur Hayes.
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