With the current volatility in the market being low, I like to explore new ideas and ways to analyze the current bull-cycle.
For this analysis I'm looking at the long-term Bitcoin price, corrected for the M1 Money Supply. This analysis is highly speculative and should not be taken at face value.
What is the M1 Money Supply?
The money supply is all the currency and other liquid instruments in a country's economy on the date measured. The money supply roughly includes both cash and deposits that can be used almost as easily as cash. - Investopedia
Generally speaking, the M1 Money Supply is the money in circulation that consumers are able to spend easily.
Why is this analysis relevant?
This analysis is relevant because it corrects the BTC price for the money available. The more money available in the economy, the more money people/companies are able to spend (and invest).
Past data
In the chart above you can see the M1 over the last decades. It's clear that there's been a lot of USD printed. The boom in stocks that we've experienced over the last year has partially been caused by the high amount of money that the FED / ECB have been injecting into the economy. Same goes for Crypto.
When we look at recent price movement of BTC/M1, it becomes apparent that BTC has not beaten the 2017 ATH yet. In addition, the price reversed from the 2019 high resistance. The 2019 high was around 14k, the 2021 high around 65k. Still, they are equally high when corrected for M1. This gives a clear indication on how much money has been printed since the COVID crash.
When comparing the bull-cycle highs, the first cycle top saw a 26x increase to the second cycle top. The second cycle top saw a 12x increase to the third cycle top. Assuming that the BTC/M1 top-to-top increase halves with each cycle, that would mean that the current cycle top should be 6x higher than the previous top in 2017.
Forecast
Assuming that M1 stays constant (wrong assumption, but made for sake of the analysis), we could expect the top of the current cycle to be 22x the current price. That would mean that the top of the current bull-cycle would be around 700k when corrected for M1, making BTC incredibly undervalued in its current state. If the price doesn't get any further than the 2017 top, we'd have to see a 2.5x from the current price, bringing the cycle top to around 80k.
Both forecasts are highly speculative and incorporate an inherently wrong assumption. Nevertheless, this analysis is valuable to the discussion on where BTC currently stands and where it can potentially go in the future. Hope you enjoyed this read.
Happy trading!
For this analysis I'm looking at the long-term Bitcoin price, corrected for the M1 Money Supply. This analysis is highly speculative and should not be taken at face value.
What is the M1 Money Supply?
The money supply is all the currency and other liquid instruments in a country's economy on the date measured. The money supply roughly includes both cash and deposits that can be used almost as easily as cash. - Investopedia
Generally speaking, the M1 Money Supply is the money in circulation that consumers are able to spend easily.
Why is this analysis relevant?
This analysis is relevant because it corrects the BTC price for the money available. The more money available in the economy, the more money people/companies are able to spend (and invest).
Past data
In the chart above you can see the M1 over the last decades. It's clear that there's been a lot of USD printed. The boom in stocks that we've experienced over the last year has partially been caused by the high amount of money that the FED / ECB have been injecting into the economy. Same goes for Crypto.
When we look at recent price movement of BTC/M1, it becomes apparent that BTC has not beaten the 2017 ATH yet. In addition, the price reversed from the 2019 high resistance. The 2019 high was around 14k, the 2021 high around 65k. Still, they are equally high when corrected for M1. This gives a clear indication on how much money has been printed since the COVID crash.
When comparing the bull-cycle highs, the first cycle top saw a 26x increase to the second cycle top. The second cycle top saw a 12x increase to the third cycle top. Assuming that the BTC/M1 top-to-top increase halves with each cycle, that would mean that the current cycle top should be 6x higher than the previous top in 2017.
Forecast
Assuming that M1 stays constant (wrong assumption, but made for sake of the analysis), we could expect the top of the current cycle to be 22x the current price. That would mean that the top of the current bull-cycle would be around 700k when corrected for M1, making BTC incredibly undervalued in its current state. If the price doesn't get any further than the 2017 top, we'd have to see a 2.5x from the current price, bringing the cycle top to around 80k.
Both forecasts are highly speculative and incorporate an inherently wrong assumption. Nevertheless, this analysis is valuable to the discussion on where BTC currently stands and where it can potentially go in the future. Hope you enjoyed this read.
Happy trading!
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