The relationship between macroeconomic indicators and cryptocurrency markets has never been more relevant—especially as Bitcoin continues to mature as a global financial asset. One of the most compelling signals emerging from recent market data is the strong correlation between M2 money supply trends and Bitcoin price movements. According to analyst Cas Abbé, recent shifts in the M2 supply are not only explaining Bitcoin’s current correction but may also be forecasting a potential rebound toward a new all-time high.
This insight offers traders and investors a powerful tool for navigating volatile markets. By understanding how liquidity in the traditional financial system impacts digital assets like Bitcoin, market participants can better time their entries and exits, aligning with broader economic cycles.
Understanding the M2 Money Supply and Its Impact on Bitcoin
M2 money supply refers to the total amount of money in circulation, including cash, checking deposits, and easily convertible near-money assets such as savings accounts and money market funds. Central banks, particularly the U.S. Federal Reserve, monitor and influence M2 through monetary policy decisions—rate changes, quantitative easing, or tightening measures.
Historically, expansions in M2 have coincided with bullish phases in risk assets, including stocks and cryptocurrencies. When more liquidity floods the system, investors tend to seek higher returns in speculative markets. Conversely, when M2 growth slows or contracts, liquidity dries up, often triggering corrections in asset prices.
In early June 2025, M2 data indicated a period of contraction following aggressive tightening policies by central banks throughout 2024 and early 2025. This shift aligns with Bitcoin’s recent pullback from its all-time high of $112,300, reached on May 30, 2025. As of June 1, 2025, Bitcoin was trading at approximately $108,542—a 3.2% decline over 24 hours—accompanied by a spike in trading volume to $38.2 billion across major exchanges like Binance and Coinbase.
Analyzing the Correction: Why $98,000–$100,000 Could Be Key
Cas Abbé’s analysis suggests that Bitcoin could test support levels between $98,000 and $100,000 before reversing course. This range isn't arbitrary—it combines technical structure with macro-driven sentiment.
On-chain metrics support this view. Data from Glassnode showed a 7% increase in Bitcoin transfers to exchanges within 24 hours leading up to June 1, 2025, signaling potential selling pressure. A net inflow of 12,400 BTC into exchange wallets often precedes short-term price dips as holders prepare to sell.
At the same time, futures trading volumes remained stable at $15.7 billion, while spot volumes declined by 10% to $22.5 billion—suggesting retail traders may be exiting positions while institutional interest holds firm.
Moreover, institutional confidence remains evident in the continued inflow of capital into Bitcoin ETFs, which saw $120 million in net inflows on May 30 alone (per Bloomberg ETF data). This divergence between short-term price action and long-term investment flows highlights a key dynamic: corrections may offer strategic accumulation opportunities.
Stock Market Correlation: A Broader Risk-Off Signal
Bitcoin’s increasing correlation with traditional markets cannot be ignored. Over the past 30 days, its correlation coefficient with the S&P 500 stood at 0.62, indicating moderate to strong alignment in price direction.
On May 31, 2025, the S&P 500 dropped 1.8% to 5,320 points amid concerns over inflation and interest rate policy—a move mirrored in crypto-related equities. MicroStrategy (MSTR), a major corporate holder of Bitcoin, fell 2.5% to $1,580 per share on NASDAQ.
This parallel movement underscores how macroeconomic sentiment influences both equity and digital asset markets. A risk-off environment typically leads to reduced liquidity and tighter investor risk appetite—conditions that favor consolidation or correction in high-beta assets like Bitcoin.
However, history shows these periods are often temporary. Once macro conditions stabilize—particularly if central banks signal a pause or reversal in tightening—liquidity tends to return, reigniting momentum in risk assets.
Technical Indicators Confirm Short-Term Bearish Pressure
Beyond macroeconomics, technical indicators reinforce the case for a near-term correction:
- The Relative Strength Index (RSI) for BTC/USDT on Binance dropped to 58 as of June 1, down from an overbought level of 72 just two days earlier.
- The MACD displayed a bearish crossover on the 4-hour chart at 6:00 AM UTC on June 1, signaling weakening upward momentum.
- Volume analysis shows declining spot activity alongside steady futures volume—a pattern often seen during profit-taking phases.
Despite these signals, the $100,000 level remains a critical psychological and technical support zone. A successful retest and bounce from this area—especially if supported by improving macro conditions—could pave the way for a breakout above $112,300 and a new all-time high.
Frequently Asked Questions
Q: What is M2 money supply, and why does it matter for Bitcoin?
A: M2 includes cash, checking deposits, and near-money assets like savings accounts. When M2 grows, more liquidity enters the system, often boosting risk assets like Bitcoin. Conversely, M2 contraction can lead to tighter liquidity and price corrections.
Q: Why might Bitcoin drop to $98,000–$100,000?
A: This range aligns with technical support levels and reflects reduced liquidity due to M2 contraction. On-chain selling pressure and stock market correlations further support this potential dip.
Q: Can Bitcoin still reach a new all-time high after this correction?
A: Yes. Institutional ETF inflows and historical patterns suggest that short-term corrections often precede larger rallies—especially if macro conditions improve.
Q: How reliable is the correlation between M2 and Bitcoin?
A: While not perfect, the correlation has been strong over multiple cycles. Bitcoin tends to lag M2 changes by several weeks to months, making it a useful leading indicator.
Q: Should I buy during this dip?
A: For long-term investors, dips into key support zones like $98,000–$100,000 may present strategic entry points—especially if supported by positive on-chain or macro developments.
Q: What signals should I watch for a reversal?
A: Look for stabilization in M2 trends, recovery in stock markets (especially the S&P 500), decreasing exchange inflows, and bullish technical reversals on RSI or MACD.
Strategic Outlook: Preparing for the Next Leg Up
While short-term volatility is expected, the broader narrative remains constructive for Bitcoin. The current correction appears consistent with historical patterns following all-time highs—driven by profit-taking, reduced liquidity, and macro uncertainty.
Yet institutional demand persists. The sustained inflow into Bitcoin ETFs indicates that large players continue to accumulate despite price fluctuations. Combined with potential future monetary easing—if inflation cools—the stage could be set for another major rally later in 2025.
Traders should monitor three key areas:
- Macroeconomic data, especially M2 supply trends and central bank policy
- Stock market behavior, as equity movements increasingly mirror crypto trends
- On-chain metrics, including exchange flows and whale accumulation patterns
👉 Gain real-time insights into market-moving indicators and stay ahead of the next Bitcoin surge.
By integrating these layers of analysis, investors can move beyond speculation and build data-driven strategies that align with both market cycles and economic fundamentals.
In conclusion, the interplay between M2 money supply, Bitcoin price action, and global risk sentiment provides a comprehensive framework for understanding today’s market dynamics. While a dip toward $98,000–$100,000 is possible—and perhaps even healthy—it may ultimately serve as a springboard for Bitcoin’s next leg higher. Those who prepare now stand to benefit when momentum returns.