As the holiday season approaches, the cryptocurrency community is abuzz with speculation. Almost four years ago, a significant event dubbed the “Thanksgiving Day Massacre” rocked the Bitcoin market. In 2020, Bitcoin’s value plummeted by 17%, descending from $19,500 to $16,200 in a matter of days. With the holiday just around the corner, many are wondering if a similar scenario is on the horizon.
Analyzing Recent Market Trends
In the early days of this week, Bitcoin experienced an 8% correction, with its price decreasing from $98,871 to a low of $90,791. This abrupt decline has ignited discussions among analysts about the possibility of history repeating itself. The event has drawn comparisons to the 2020 Thanksgiving crash, leading many to question the potential causes and implications of such a market shift.
Bitcoin ‘Thanksgiving Day Massacre’ 2024?
Alex Thorn, Head of Research at Galaxy Digital, has taken to social media to highlight the similarities between the current market conditions and those of 2020. He reminisces about the drastic drop Bitcoin faced over the Thanksgiving period in 2020 and speculates about whether a similar pattern might emerge this year. Thorn points out that Bitcoin’s value tripled in the five months following the 2020 crash, prompting the question: is history about to rhyme?
Global M2 Money Supply’s Influence
One possible catalyst for a potential downturn could be the global M2 money supply. A chart correlating Bitcoin’s price with global M2 is making rounds on social media. Analyst Joe Consorti from Theya notes that Bitcoin has been closely tracking global M2 with an approximate 70-day lag since September 2023. The global M2 has seen a decline from $108.3 trillion to $104.7 trillion over the past months, influenced by factors like a robust US dollar and economic slowdowns affecting lending and deposit creation.
Potential Market Corrections
Consorti warns of a possible 20-25% correction if Bitcoin continues to follow the current M2 contraction trend. This could potentially bring Bitcoin’s price down to around $73,000. However, he also acknowledges the possibility of Bitcoin defying this trend, similar to its performance during 2022-2023 when external factors like the FTX collapse impacted the market.
Consorti suggests that structural ETF inflows and corporate buying pressure might help Bitcoin resist the current M2 deflation. He emphasizes the importance of understanding the asset, its macro environment, and the forces influencing its long-term trajectory. For those who grasp the intricacies of Bitcoin, panic selling is not an option.
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Despite these cautious views, some analysts maintain a more optimistic outlook. Jamie Coutts, Chief Crypto Analyst at Real Vision, points out that Bitcoin has shown resilience against tightening liquidity over the past month. While he acknowledges that Bitcoin appears overstretched compared to global M2, he remains hopeful about the potential for policy shifts that could favor risk assets.
Economist Andreas Steno has suggested that the Federal Reserve might be considering liquidity support measures as early as December. Coutts believes this could mark a turning point for risk assets, signaling a bullish outlook for Bitcoin in 2025. He concludes that the Federal Reserve could be signaling a positive future for Bitcoin and other risk assets.
Current Market Status
At the time of writing, Bitcoin is trading at $93,250. The market remains dynamic, and the coming days will reveal whether Bitcoin can withstand the pressures of the global financial landscape or if a correction is imminent.
