Bitcoin has retreated from its all-time high of over $100,000 in the last week as BlackRock quietly confirmed a worrying bitcoin pump.
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The price of bitcoin has plummeted to $90,000 per bitcoin, and the Federal Reserve’s “biggest nightmare” weighs on the cryptocurrency market.
Now, as Donald Trump confirms he has big plans for bitcoin, a financial analyst has warned that a $4.1 trillion drop in the global money supply could be about to trigger a drop in bitcoin’s price to $20,0000.
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“In the past, bitcoin prices have followed the global money supply with a lag of ~10 weeks,” The Kobeissi Letter analysts posted on X, asking, “Is bitcoin overdue for a correction?”
Analysts at Kobeissi noted that the money supply fell by $4.1 trillion to $104.4 trillion, the lowest since August, after peaking at $108.5 trillion in October.
“If the relationship still holds, this suggests bitcoin prices could fall as much as $20,000 in the coming weeks. Bitcoin’s red-hot run may take a pause.”
The Federal Reserve, which controls the money supply through monetary policy, has been struggling to control inflation this year while also trying to lower interest rates to prevent the economy from falling into recession.
The Federal Reserve last week cut interest rates by a well-publicized 25 basis points even as prices began to rise again, but signaled it will move more slowly on the expected path of rate cuts next year.
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ForbesBlackRock Just Quietly Confirmed a Devastating Bitcoin Price BombBy Billy Bambrough
The Fed’s “economic outlook” and Chairman Powell’s press conference suggested that inflation is going to be tougher than previously thought. This means they will proceed with the current rate cut cycle slowly and cautiously with inflation, which appears to be reaccelerating over the past few months,” said Yuya Hasegawa, bitcoin and cryptocurrency market analyst at Tokyo-based Bitbank, in comments sent by email.
“There is also a possibility that the Fed will stop cutting rates at some point during 2025 if inflation rises too much and, in the worst case, they could start to rise again. Monetary easing has almost always favored the price of bitcoin , and the opposite has had negative consequences on the price.”
US debt has skyrocketed in recent years, topping $34 trillion by early 2024, and Covid stimulus and lockdown measures contributed to massive government spending and helped inflation spiral out of control in 2022. .
Inflation above 10% forced the Federal Reserve to raise interest rates at a historic pace, raising debt interest payments and fueling fears of a “death spiral.”
“While the Federal Reserve’s potential policy change will likely put pressure on bitcoin, high interest rates will also keep pressure on government debt payments,” Hasegawa said.
“The growing federal government debt already raises the question of its sustainability and the government’s credibility could gradually become one of the issues the market will pay attention to in 2025.”
