Bitcoin (BTC) Price Slumps Below $90,000 as Global Liquidity Crunch Signals Trouble

Bitcoin (BTC) price has struggled to maintain its recent highs, slipping below $90,000 as market sentiment shows signs of caution.

Bitcoin’s recent price drop below $90,000 could be a sign of trouble, especially considering the cryptocurrency’s status as a liquidity-sensitive asset and the current macroeconomic conditions.

A recent tweet by @The0xReport speculates that BTC price might grind lower into the $70,000-$80,000 range due to tightening global liquidity conditions. The accompanying chart showed Bitcoin’s price closely following trends in the global M2 money supply, albeit with a lag of about 10 weeks.

The recent plateau in M2 supply coincides with Bitcoin’s sharp pullback from $100,000 to $92,500, suggesting diminishing liquidity is playing a key role in the cryptocurrency’s decline. The tweet highlights how BTC price tends to reflect broader liquidity trends.

Historical patterns also support this analysis. According to MacroMicro, Bitcoin has performed well during periods of rapid M2 expansion, such as 2020-2021, when central banks injected record levels of liquidity into the global economy to offset the impact of the COVID-19 pandemic. This surge in liquidity fueled speculative investment, driving BTC prices to new highs.

However, as central banks began tightening monetary policies in 2022, reducing M2 growth, Bitcoin entered a prolonged bear market phase. The price action reinforces the narrative that the token’s price trajectory is closely linked to global liquidity dynamics.

Currently, the M2 money supply remains stagnant, reflecting a continuation of restrictive monetary policies by major central banks. This has reduced speculative capital flows into assets like Bitcoin, increasing the likelihood of a deeper correction. The projected consolidation zone of $70,000-$80,000 corresponds with historical price levels observed during previous liquidity contractions.

As central banks show no signs of loosening policies, the token’s performance will likely remain subdued in the short to medium term, reflecting its dependence on global liquidity trends.