Bitcoin experienced a significant 15% drop in the third week of December, its largest since August. This decline is largely linked to unfavorable global economic trends, raising concerns about further price decreases. The global money supply has diminished by $4.1 trillion over the past two months, potentially signaling more downward pressure on Bitcoin. Historically, Bitcoin’s price correlates with global liquidity, and experts warn it might fall by up to $20,000 if this trend continues. However, some analysts suggest that an increasing illiquid supply of Bitcoin could help stabilize its price, hinting at future volatility but also potential buying opportunities. Currently, Bitcoin trades around $94,000 after a recent nearly 6% weekend drop.
Bitcoin Experiences Significant Price Correction Amid Economic Pressures
Bitcoin recently faced a steep 15% drop in its value, marking its largest weekly decline since August. Analysts suggest that this downturn is heavily influenced by global macroeconomic pressures. If these conditions worsen, Bitcoin could see additional decreases in its price.
However, there are also internal factors that may help stabilize Bitcoin. According to The Kobeissi Letter, the cryptocurrency has historically correlated with global money supply changes. Over the last two months, the global money supply, also known as Global M2, has decreased by $4.1 trillion. This drop could imply further price reductions for Bitcoin if the trend continues.
Global M2 is an essential economic indicator that encompasses all liquid assets within the global economy. Changes in this measurement often have significant effects on both stock markets and cryptocurrencies. In October, when the global money supply hit a record $108.5 trillion, Bitcoin reached its all-time peak of $108,000. However, the recent decline raises concerns that Bitcoin could experience losses of up to $20,000 in the coming weeks.
Joe Consorti from Bitcoin custody firm Theya had previously warned of a possible 20%-25% correction based on similar economic signals, and predictions appear to be coming to fruition. André Dragosch, Head of Research at Bitwise, shares this cautious forecast, believing that liquidity tightening in the U.S. will continue to exert pressure on Bitcoin prices. Nonetheless, he points to an essential factor—the growing illiquid supply of Bitcoin, which may help support its value as it indicates increased scarcity.
Experts suggest that Bitcoin is currently navigating the impact of declining global liquidity alongside strong internal supply dynamics. Dragosch believes that in the long run, bullish factors related to Bitcoin’s supply could outweigh the negative influences of macroeconomic conditions, although this may lead to volatility in the short term.
As of now, Bitcoin is trading at approximately $94,000 and has seen a nearly 6% decline over the past weekend. Investors should keep a close watch on broader economic trends and internal Bitcoin metrics to make informed decisions.
Disclaimer: Always verify information independently and consult professionals before making financial decisions.
FAQ on Bitcoin’s Potential $20,000 Drop
What is happening with Bitcoin’s price?
Bitcoin’s price might drop by $20,000 due to a decrease in the global money supply. When less money is available, investments like Bitcoin can lose value.
Why would a shrinking money supply affect Bitcoin?
A shrinking money supply typically means people have less money to spend on investments. If fewer people are buying Bitcoin, its price could fall significantly.
Is this drop certain?
No, it is not certain. Price predictions are not always accurate. Many factors influence Bitcoin’s price, and it could go up or down depending on various conditions.
What should I do if I own Bitcoin?
If you own Bitcoin, keep an eye on Market trends and news. Consider your investment goals and risk tolerance. It may help to talk to a financial advisor before making decisions.
Can Bitcoin recover from a drop like this?
Yes, Bitcoin can recover after a drop. The Market often experiences ups and downs. Although it may take time, Bitcoin has bounced back from drops before.
