Quick Facts

Bitcoin has rallied 58% since May, with many attributing its growth to the M2 money supply turning positive year-over-year for the first time since November 2023.

The Spark That Ignites: How US Dollar Weakness and a Growing Money Supply Could Fuel Bitcoin’s 2025 Rally

In recent months, the cryptocurrency market has witnessed a resurgence, with Bitcoin leading the charge. The flagship cryptocurrency has rallied an impressive 58% since May, with many attributing its growth to the M2 money supply turning positive year-over-year for the first time since November 2023. While this phenomenon has sparked widespread interest, we believe there’s more to the story. In this article, we’ll explore the underlying factors driving the US dollar’s weakness and its potential impact on the global economy. We’ll also examine how growing money supply could fuel Bitcoin’s 2025 rally, making the case for some of the most bullish predictions we’ve seen to date.

The Weakening US Dollar

A declining US dollar has been the norm for much of the past decade, with several reasons contributing to this trend. The first and most obvious is the Federal Reserve’s unconventional monetary policies, which have led to an unprecedented level of money printing. In response to the 2008 financial crisis, the Fed introduced quantitative easing (QE) programs to stimulate the economy by injecting trillions of dollars into the financial system. Although these measures helped the US recover, they also led to a surge in the money supply, devaluing the dollar and sparking a long-term decline.

Another significant factor driving the dollar’s weakness is the growing trade deficit. As the US imports more goods and services than it exports, the country needs to rely on foreign capital to finance its deficit. This has led to an influx of foreign dollars, further diluting the currency’s value.

The Growing Money Supply

As the M2 money supply turned positive year-over-year for the first time since November 2023, many analysts pointed to this development as a catalyst for Bitcoin’s growth. M2, a broad measure of money supply, includes physical cash, demand deposits, and other deposits at commercial banks. While the M2 money supply figures might not be directly correlated with cryptocurrency prices, they do provide valuable insights into the overall health of the global economy.

The growing money supply can be attributed to several factors, including:

Central Bank Intervention: As central banks around the world implement unconventional monetary policies to combat the economic fallout of the pandemic, they are printing more money to inject into the system. This increased liquidity is likely to fuel inflation and drive the value of fiat currencies down.
Increased Borrowing: With interest rates near historic lows, individuals and businesses are taking advantage of cheap credit to borrow and spend more. This increased borrowing activity leads to an influx of new money entering the economy, further expanding the money supply.
Quantitative Easing: As the Federal Reserve and other central banks continue to implement QE programs, they are injecting more money into the economy, contributing to the growing money supply.

The Link Between Dollar Weakness and Bitcoin’s Growth

As the US dollar weakens, the value of other currencies, including the euro and the yen, tends to appreciate. However, some assets, like Bitcoin, have historically performed well during periods of dollar weakness. This inverse correlation stems from several factors:

Store of Value: Bitcoin, as a decentralized and limited asset, offers a safe-haven alternative to fiat currencies. Investors seeking a store of value often turn to Bitcoin during times of economic uncertainty, driving its price up.
Inflation Protection: As inflation increases, the purchasing power of fiat currencies decreases, making it essential for investors to diversify their portfolios with assets that maintain their value. Bitcoin’s fixed supply and decentralized nature make it an attractive option for protecting against inflation.
Global Monetary Policy: The weakening dollar is often a sign of a weakening economic powerhouse. As other economies, like China and those in the eurozone, rise to take the reins, investors may turn to Bitcoin as a hedge against global uncertainties.

The 2025 Rally: A Forecast for the Ages

Considering the growing money supply, dollar weakness, and Bitcoin’s inverse correlation with fiat currencies, we believe the cryptocurrency is poised for a significant rally in 2025. Key indicators suggest that the fundamentals are in place for a major upswing:

Increased Institutional Investment: As the market becomes more mature, institutional investors are slowly entering the cryptocurrency space, driving up demand and prices.
Growing Adoptions: Mainstream companies are increasingly integrating cryptocurrencies into their payment systems, supply chains, and business models, expanding the scope and reach of the industry.
Improving Regulatory Framework: Governments and regulatory bodies are working to create a more favorable environment for cryptocurrencies, encouraging innovation and growth.

As we look to the future, we believe that Bitcoin’s price will likely continue to appreciate, driven by a combination of dollar weakness, growing money supply, and increased adoption. For investors seeking a hedge against inflation, a store of value, and a share in the cryptocurrency’s potential for growth, Bitcoin offers an attractive opportunity.

US Dollar Weakening and Escalating Money Supply may Unleash Bitcoin’s 2025 Upsurge