Almost 4 years in the past to the day, Bitcoin skilled a dramatic 17% plunge from $19,500 to $16,200 in 2020, an occasion that grew to become infamously generally known as the “Thanksgiving Day Massacre.” As the vacation approaches as soon as once more, market members are questioning whether or not historical past would possibly repeat itself.
On Monday and Tuesday, Bitcoin’s value underwent an 8% correction, dropping from $98,871 to a low of $90,791. This sudden downturn has sparked discussions amongst analysts if historical past might be repeating for the BTC value.
Bitcoin ‘Thanksgiving Day Massacre’ 2024?
Alex Thorn, Head of Research at Galaxy Digital, took to X to attract parallels between the present market and the occasions of 2020. “Who remembers the Thanksgiving dump of 2020? Bitcoin dumped 17% between Wednesday, Nov 25, and Friday, Nov 27, 2020. BTCUSD later went on to more than 3x over the next 5 months. Does history rhyme?”
A possible catalyst for the crash might be the global M2 money supply. Currently, a chart illustrating the correlation between Bitcoin and world M2 is circulating 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 previous two months, world M2 has declined from $108.3 trillion to $104.7 trillion, pushed by components reminiscent of a strengthening US greenback—devaluing overseas currency-denominated M2 when transformed into {dollars}—and financial slowdowns dampening lending and deposit creation.
Related Reading
Consorti cautions, “If it continues to follow the current contraction in M2, a 20-25% correction could materialize, potentially pulling bitcoin down to roughly $73,000—not a price prediction, but a stark reminder of Bitcoin’s tether to the global money supply.” However, he additionally acknowledged that Bitcoin would possibly defy this development, because it has up to now, notably “from 2022-2023 due to the FTX collapse and interest in the space evaporating as a result.”
He means that structural ETF inflows and company shopping for stress may assist Bitcoin resist the present M2 deflation. Consorti concludes, “Either way, a correction at this point seems about right. As mentioned before, these rapid run-ups in Bitcoin’s price always have pitstops along the way, […] it’s vital to understand the asset you hold, the macro environment it exists in, and the forces driving it higher long-term. If you truly understand bitcoin, you don’t panic sell.”
Related Reading
Despite the cautious outlook, some analysts imagine the dip could also be short-lived. Jamie Coutts, Chief Crypto Analyst at Real Vision, points out by way of X that “a Bitcoin bid has overshadowed tightening liquidity over the past month.” While acknowledging that Bitcoin seems “overstretched vs. global M2” and that his liquidity mannequin instructed warning, particularly with leverage, Coutts highlights potential coverage shifts that might favor danger property.
He references insights from economist Andreas Steno, indicating that the Federal Reserve is “in effect, discussing a put for USD liquidity—changes to support liquidity developments as early as December.” Coutts concludes: “DXY could have topped here. The lag effect that Fintwit is focused on atm is still real, but ultimately, the Fed is waving the bull flag for risk assets again. Bullish 2025. Bullish BTC.”
At press time, BTC traded at $93,250.
Featured picture created with DALL.E, chart from TradingView.com
