Bitcoin Experiences 8% Price Correction Amid Concerns of Historical Repeat
Nearly four years ago, Bitcoin's price fell 17% from $19,500 to $16,200 on Thanksgiving Day 2020, an event termed the "Thanksgiving Day Massacre." With the holiday approaching again, market participants are speculating about a potential repeat.
Recently, Bitcoin experienced an 8% correction, dropping from $98,871 to a low of $90,791. This downturn has prompted analysts to consider whether history is repeating itself for BTC.
Bitcoin ‘Thanksgiving Day Massacre’ 2024?
Alex Thorn, Head of Research at Galaxy Digital, noted parallels between the current market and 2020 events. He highlighted that Bitcoin declined 17% between November 25 and November 27, 2020, but later increased over threefold in five months. He posed the question: does history rhyme?
A possible factor contributing to the decline could be the global M2 money supply. A chart showing the correlation between Bitcoin and global M2 has gained attention on X.
Joe Consorti, an analyst at Theya, observed that since September 2023, Bitcoin has closely tracked global M2 with a ~70-day lag. Over the last two months, global M2 decreased from $108.3 trillion to $104.7 trillion, influenced by a strengthening US dollar and economic slowdowns affecting lending and deposit creation.
Consorti warned that if Bitcoin continues to follow the contraction in M2, a 20-25% correction could occur, potentially bringing Bitcoin down to around $73,000. He clarified this is not a price prediction but a reminder of Bitcoin’s connection to the global money supply. However, he acknowledged that Bitcoin might diverge from this trend, as seen previously during the FTX collapse.
He suggested that structural ETF inflows and corporate buying pressure might help Bitcoin withstand current M2 deflation. Consorti concluded that a correction seems plausible, emphasizing the importance of understanding the asset and macro environment rather than panic selling.
Despite cautious perspectives, some analysts believe the dip may be transient. Jamie Coutts, Chief Crypto Analyst at Real Vision, noted that a Bitcoin bid has overshadowed tightening liquidity in recent weeks. While he acknowledged that Bitcoin seems overstretched relative to global M2, he indicated possible policy changes could favor risk assets.
Coutts referenced insights from economist Andreas Steno, suggesting that the Federal Reserve might soon support liquidity developments. He stated: “DXY could have topped here. The lag effect that Fintwit is focused on is still real, but ultimately, the Fed is waving the bull flag for risk assets again. Bullish 2025. Bullish BTC.”
As of the latest update, BTC was trading at $93,250.
