This cryptocurrency market cycle may be longer than you think. The idea is that the global expansion of the money supply may continue until 2026.
Bitcoin and M2 supply
Bitcoin market cycles are closely related to the M2 money supply and growing liquidity – this is confirmed by data describing past bear markets and bull markets.
Before I go any further, I need to explain what M2 supply is. It includes cash in circulation and deposits and is an extension of M1 to include deposits in commercial banks with a return period of up to and including 2 years. Now it is in this field that we see global expansion, which should drive market growth.
The above phenomenon was noticed by analyst Michaël van de Poppe: he noticed that in 2017 the supply of M2 was growing significantly, and the cycle lasted until the end of the year (BTC reached a peak at USD 20,000). Taking the cryptocurrency story further: during the 2021 bull market, the supply of M2 grew strongly again, and cryptocurrency markets followed suit. But then it gets more interesting: in 2022, the money supply continued to grow, but a bear market began on the BTC market, which resulted in interest rate increases.
What are the conclusions? Such that cryptocurrencies are dependent on liquidity and its scale, although this tends to happen in an environment of low interest rates. The Fed has started cutting rates, so we’ll be in that situation soon. The analyst believes that the supply of M2 will continue to grow until mid-2026, and “liquidity expansion will likely extend the cycle.”
M2 is currently growing at a rate of 2.59% (that’s more than inflation!) and currently stands at $21.2 trillion.
Will the bitcoin price surprise positively?
It is worth adding that in the background the US public debt is also growing, and the interest on it alone already amounts to over USD 1 trillion per year (the highest in history). To deal with the debt, the authorities will have to print money, thus generating inflation in the long run (this is how the debt is artificially “lowered”). All this may work to BTC’s advantage up to a point. Especially in an environment of low interest rates. It is therefore possible that the current cycle will be extended by a few months. However, everything will depend on the Fed’s policy and the broader environment – macroeconomic and geopolitical.
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