The price of Bitcoin (BTC) has increased by 8% from its low of $76,703 on March 11. This rise is partly attributed to large investors actively purchasing the dip using leverage.
On Bitfinex, margin long positions soared to their highest level since November 2024, adding 13,787 BTC within 17 days. Currently valued at $5.7 billion, this bullish leveraged position indicates a strong belief in Bitcoin’s potential for upward movement despite recent price fluctuations.
Bitcoin/USD (orange, left) vs. Bitfinex BTC margin longs (right). Source: TradingView / Cointelegraph
Some experts suggest that Bitcoin’s price is closely tied to the global monetary base, implying it often rises when central banks inject liquidity.
With increasing recession risks, there is a growing chance that expansionary monetary policies might boost the money supply. If this correlation holds, large traders on Bitfinex could be well-positioned to benefit from a surge above $105,000 in the coming months.
Source: pakpakchicken
For example, an X user claims to have found an 82% correlation between the global money supply (M2) and Bitcoin’s price.
When central banks reduce liquidity by increasing interest rates or lowering their bond holdings, risk aversion among traders tends to rise, leading to decreased demand for Bitcoin. On the other hand, periods of monetary easing usually boost interest in the asset, enhancing its price potential.
Bitfinex traders increase BTC positions as M2 levels decline
In early September 2024, traders on Bitfinex raised 7,840 BTC in long positions during a time when Bitcoin struggled to retake the $50,000 mark for over three months.
Despite the bearish environment, these investors maintained their positions, and Bitcoin’s price jumped past $75,000 less than two months later. Notably, around the same time, the global M2 money supply reached its lowest point, further supporting the observed correlation.
Establishing a direct cause-and-effect link between money supply and investors’ inclinations to accumulate Bitcoin may be challenging, especially given the impact of significant events during those times.
For instance, Donald Trump’s election as President of the United States in November 2024 significantly contributed to Bitcoin’s rally, thanks to the new administration’s favorable stance toward cryptocurrencies, regardless of global M2 trends and the liquidity landscape.
Spot Bitcoin ETF net flows, USD. Source: CoinGlass
Similarly, Michael Saylor’s recent strategy to raise up to $21 billion in new capital to acquire more Bitcoin could alter market dynamics, even amid the $4.1 billion in net outflows from Bitcoin spot exchange-traded funds since February 24.
Strategy continues to be the largest corporate holder of Bitcoin, with 499,096 BTC purchased at a total investment of $33.1 billion, reinforcing its long-term bullish outlook.
Improved regulatory environment, Strategy’s capital infusion
In summary, while the expansion of the global money supply may have contributed to the rise in Bitfinex margin longs, Bitcoin’s push towards $105,000 might be more significantly influenced by news and developments within the industry.
A report from March 13 indicated that representatives of Donald Trump have engaged in talks about the possibility of acquiring a stake in Binance.
Related: US Bitcoin ETFs break outflow streak with $13.3M inflow
Thus far, the market impact of a more crypto-friendly US administration has yet to provide tangible benefits.
The Office of the Comptroller of the Currency (OCC) has yet to clarify whether banks can handle digital assets and manage stablecoins without prior approval.
Additionally, Acting SEC Chairman Mark Uyeda announced intentions to remove crypto-specific provisions from a proposed rule that would broaden exchange definitions.
The US Securities and Exchange Commission is presently considering requests from spot Bitcoin ETF issuers to allow in-kind creations and redemptions, which would enable shares to be directly exchanged for Bitcoin rather than utilizing the traditional cash method.
Meanwhile, the global macroeconomic climate has worsened, exerting pressure on Bitcoin’s price. However, these same conditions are gradually driving governments toward economic stimulus and an expanding M2 money supply.
If this trend continues, it may ultimately create a favorable environment for Bitcoin’s price to achieve the $105,000 prediction by May 2025, and possibly even higher.
This article is intended for general informational purposes and should not be regarded as legal or investment advice. The views expressed here are solely those of the author and may not necessarily represent the views of any other entity.