Crypto regulation shifts as Bitcoin eyes $105K amid liquidity boost

Bitcoin (BTC) price has risen 8% from its March 11 low of $76,703, driven in part by large investors aggressively buying the dip with leverage.

Margin longs on Bitfinex surged to their highest level since November 2024, adding 13,787 BTC over 17 days. Currently standing at $5.7 billion, this bullish leveraged positioning signals confidence in Bitcoin’s upside potential despite recent price weakness.

Bitcoin/USD (orange, left) vs. Bitfinex BTC margin longs (right). Source: TradingView / Cointelegraph

Some analysts argue that Bitcoin’s price is closely linked to the global monetary base, meaning it tends to rise as central banks inject liquidity.

With recession risks mounting, the likelihood of expansionary monetary policies increasing the money supply grows. If this correlation holds, Bitfinex whales could be well-positioned to capitalize on a rally above $105,000 in the next two months.

Source: pakpakchicken

For instance, X user Pakpakchicken claims to have identified an 82% correlation between the global money supply (M2) and Bitcoin’s price.

When central banks drain liquidity by raising interest rates or reducing bond holdings, traders become more risk-averse, leading to weaker demand for Bitcoin. Conversely, periods of monetary easing tend to fuel greater investor interest in the asset, increasing its price potential.

In early September 2024, Bitfinex margin traders added 7,840 BTC in long positions, coinciding with a period of bearish momentum as Bitcoin struggled to reclaim the $50,000 level for over three months.

Despite the downturn, Bitfinex whales held their positions, and Bitcoin’s price surged past $75,000 less than two months later. Notably, the global M2 money supply bottomed out around the same time these traders increased their Bitcoin exposure, further reinforcing the correlation.

It may be impossible to establish a direct cause-and-effect relationship between money supply and investors’ willingness to accumulate Bitcoin, especially given the influence of major events during these periods.

For example, Donald Trump’s election as US president in November 2024 significantly fueled Bitcoin’s rally due to the new administration’s pro-crypto stance, regardless of global M2 trends and liquidity conditions.

Spot Bitcoin ETF net flows, USD. Source: CoinGlass

Similarly, Michael Saylor’s latest plan to raise up to $21 billion in fresh capital for Strategy to acquire more Bitcoin could shift market dynamics, even accounting for the $4.1 billion in net outflows from Bitcoin spot exchange-traded funds (ETFs) since Feb. 24.

Strategy remains the largest corporate Bitcoin holder, with 499,096 BTC acquired at a total cost of $33.1 billion, reinforcing its long-term bullish strategy.

In essence, the expansion of the global money supply may have influenced the increase in Bitfinex margin longs, but Bitcoin’s push toward $105,000 could be primarily driven by industry-specific news and events.

A Wall Street Journal report on March 13 revealed that representatives of Donald Trump have held discussions about potentially acquiring a stake in Binance.

Related: US Bitcoin ETFs break outflow streak with $13.3M inflow

So far, the market impact of a more crypto-friendly US government has yet to yield concrete benefits.

For example, the Office of the Comptroller of the Currency (OCC) has not yet clarified whether banks can custody digital assets and manage stablecoins without prior approval.

Similarly, Acting SEC Chairman Mark Uyeda announced plans to remove crypto-specific provisions from a proposed rule that would expand exchange definitions.

The US Securities and Exchange Commission is currently reviewing requests from spot Bitcoin ETF issuers to permit in-kind creations and redemptions, allowing shares to be exchanged directly for Bitcoin instead of using the traditional cash-based method.

Meanwhile, global macroeconomic conditions have deteriorated, putting pressure on Bitcoin’s price. However, these same factors gradually push governments toward economic stimulus measures and expand the M2 money supply.

If this trend continues, it should ultimately create conditions for Bitcoin's price to meet Pakpakchicken’s $105,000 prediction by May 2025 and possibly go even higher.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.