Will Bitcoin See Another ‘Thanksgiving Day Massacre’?

Nearly 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 turned infamously often called the “Thanksgiving Day Bloodbath.” As the vacation approaches as soon as once more, market members are questioning whether or not historical past may 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 could possibly be repeating for the BTC value.

Bitcoin ‘Thanksgiving Day Bloodbath’ 2024?

Alex Thorn, Head of Analysis 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 greater than 3x over the subsequent 5 months. Does historical past rhyme?”

A possible catalyst for the crash could possibly be the global M2 money supply. At the moment, 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 intently tracked world 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 elements similar to a strengthening US greenback—devaluing overseas currency-denominated M2 when transformed into {dollars}—and financial slowdowns dampening lending and deposit creation.

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Consorti cautions, “If it continues to comply with the present contraction in M2, a 20-25% correction might materialize, probably pulling bitcoin all the way down to roughly $73,000—not a value prediction, however a stark reminder of Bitcoin’s tether to the worldwide cash provide.” Nonetheless, he additionally acknowledged that Bitcoin may defy this pattern, because it has prior to now, significantly “from 2022-2023 as a result of FTX collapse and curiosity within the house evaporating because of this.”

He means that structural ETF inflows and company shopping for stress might assist Bitcoin resist the present M2 deflation. Consorti concludes, “Both means, a correction at this level appears about proper. As talked about earlier than, these speedy run-ups in Bitcoin’s value at all times have pitstops alongside the best way, […] it’s important to grasp the asset you maintain, the macro setting it exists in, and the forces driving it increased long-term. If you happen to actually perceive bitcoin, you don’t panic promote.”

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Regardless of the cautious outlook, some analysts consider the dip could also be short-lived. Jamie Coutts, Chief Crypto Analyst at Actual Imaginative and prescient, points out through X that “a Bitcoin bid has overshadowed tightening liquidity over the previous month.” Whereas acknowledging that Bitcoin seems “overstretched vs. world M2” and that his liquidity mannequin advised warning, particularly with leverage, Coutts highlights potential coverage shifts that might favor danger belongings.

He references insights from economist Andreas Steno, indicating that the Federal Reserve is “in impact, discussing a put for USD liquidity—modifications to assist liquidity developments as early as December.” Coutts concludes: “DXY might have topped right here. The lag impact that Fintwit is targeted on atm continues to be actual, however finally, the Fed is waving the bull flag for danger belongings once more. Bullish 2025. Bullish BTC.”

At press time, BTC traded at $93,250.

Featured picture created with DALL.E, chart from TradingView.com