Bitcoin Faces Key Support Level Amid Macroeconomic Conditions

Bitcoin appears to be in a favorable position due to increasing global M2 money supply; however, a dip below $58,000 could result in significant liquidations.

Bitcoin’s Current Situation

Despite the optimistic macroeconomic outlook surrounding Bitcoin, there is a looming risk of over $500 million in liquidations, which could introduce further volatility to the cryptocurrency.

According to Jamie Coutts, a leading crypto analyst at Real Vision, Bitcoin’s current mid-cycle adjustment positions it for a potential bullish surge when related to the global M2 money supply.

Coutts expressed in an August 13 post:

“Over the past decade, Bitcoin has had a tendency to trough several months before the bottom in global M2. Then it rips, gets way ahead of the move in liquidity, and has a mid-cycle correction.”

The analyst noted that the increasing global liquidity from the M2 supply and the introduction of spot Bitcoin exchange-traded funds (ETFs) create a “perfect setup” for Bitcoin’s growth.

During a recent recovery, Bitcoin came back from a significant $510 billion market sell-off, which led to its price dropping to a five-month low of $49,500 on August 5, and it continues to hover below the critical psychological barrier of $60,000.

Risk of Major Liquidations

Even with a bullish macroeconomic backdrop, Bitcoin’s price may still experience a correction towards the $55,000 level.

• A decrease below $58,000 could trigger approximately $489 million in liquidations of leveraged short positions across various exchanges, based on Coinglass data.
• If Bitcoin falls below $57,500, cumulative short liquidations could exceed $800 million.

Status of Bitcoin’s Downtrend

As of now, Bitcoin is struggling to move beyond its two-week downtrend, which has been in place since July 28.

Analyst Rekt Capital suggests that a successful retest of this downtrend line may lead to increased bullish momentum. In an August 12 post, they mentioned:

“As time goes on, the downtrend represents lower prices, meaning that retest attempts could go to lower prices and still be successful. The key here is trend continuation. Bitcoin needs to experience strong buy-side volume on the retest of the downtrend.”

Additional analysts are monitoring a possible correction to $55,000 as a necessary step for Bitcoin to gain further upward momentum.