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Bitcoin Correction: M2 Liquidity Offers Reason for Optimism
In January, Bitcoin neared $110k, a Bitcoin Strategic Reserve was rumored, and investors were bullish. However, since then, in the classic "sell the news" fashion, Bitcoin has plunged to a high $70k's. Nevertheless, despite the recent correction and short-term volatility, long-term-focused Bitcoin investors should stay the course. Below are three reasons to keep the faith:
Bitcoin and Liquidity (M2) Are Correlated
In economics, M2 represents the money supply, including cash checking deposits, saving deposits, and other easily convertible near-money assets. Fundamentally, M2 constitutes a high-level overview of liquidity, or the money circulating in the economy. Though markets have many moving parts, from a first principle's perspective, savvy investors understand that M2, or liquidity, is the primary driver of asset prices.
"Earnings don't move the overall market; it's the Federal Reserve Board. Focus on the central banks and focus on the movement of liquidity. Most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets."~Stanley Druckenmiller
M2 increases when the Federal Reserve cuts interest rates. After a lackluster February jobs report, plunging equities, and tariff uncertainties, the odds of a rate cut in June have shot up to 86.7% (according to the CME FedWatch Tool). Below is a chart that shows the correlation between M2 and Bitcoin.
As "RealVision" founder Raoul Pal (@raoulGMI) points out, "We had the exact same correction in 2017 caused by the same reaction to Trump policies (higher dollar and higher rates which then reversed)..."
Bitcoin's Technical Confluence Zone
The iShares Bitcoin Trust ETF is approaching a critical technical confluence zone that should act as a high reward-to-risk zone for investors with a long-term investing time frame and the ability to stomach short-term volatility. IBIT shares are in the process of filling the November election gap, tagging the rising 40-week moving average, and testing the previous breakout zone.
Crypto Czar Confirms Bitcoin Is Best-in-Breed
David Sacks, the Trump Administration's "Crypto Czar" and former host of the wildly popular "All In" podcast, appeared on his old podcast last week to discuss the U.S. Strategic Bitcoin Reserve. Several times during his interview, Sacks made the critical distinction between Bitcoin and other digital assets, saying, "We've decided that Bitcoin is scarce, it's valuable, and that it's strategic for the United States to hold on to this as a long-term reserve asset."
Bitcoin's breathtaking performance confirms that it's in a league of its own. Since 2010, Bitcoin has averaged triple-digit percentage annual gains and has only recorded three down years.
The fact that the U.S. will HODL (hold on for dear life) to its roughly 200k Bitcoin is a welcome sign for investors and means that no additional supply from the government will flood the market.
Bottom Line
The likelihood of increasing M2, a high reward-to-risk technical zone, and the new "Strategic Bitcoin Reserve" suggest that crypto-related stocks like Coinbase, MicroStrategy, Robinhood, andRiot Platforms may be ready to bounce.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: IBIT, Coinbase, MicroStrategy, Robinhood and Riot Platforms
For Immediate Release
Chicago, IL – March 12, 2025– Today, Zacks Investment Ideas feature highlights iShares Bitcoin Trust ETF (IBIT - Free Report) , Coinbase (COIN - Free Report) , MicroStrategy (MSTR - Free Report) , Robinhood (HOOD - Free Report) , and Riot Platforms (RIOT - Free Report) .
Bitcoin Correction: M2 Liquidity Offers Reason for Optimism
In January, Bitcoin neared $110k, a Bitcoin Strategic Reserve was rumored, and investors were bullish. However, since then, in the classic "sell the news" fashion, Bitcoin has plunged to a high $70k's. Nevertheless, despite the recent correction and short-term volatility, long-term-focused Bitcoin investors should stay the course. Below are three reasons to keep the faith:
Bitcoin and Liquidity (M2) Are Correlated
In economics, M2 represents the money supply, including cash checking deposits, saving deposits, and other easily convertible near-money assets. Fundamentally, M2 constitutes a high-level overview of liquidity, or the money circulating in the economy. Though markets have many moving parts, from a first principle's perspective, savvy investors understand that M2, or liquidity, is the primary driver of asset prices.
"Earnings don't move the overall market; it's the Federal Reserve Board. Focus on the central banks and focus on the movement of liquidity. Most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets."~Stanley Druckenmiller
M2 increases when the Federal Reserve cuts interest rates. After a lackluster February jobs report, plunging equities, and tariff uncertainties, the odds of a rate cut in June have shot up to 86.7% (according to the CME FedWatch Tool). Below is a chart that shows the correlation between M2 and Bitcoin.
As "RealVision" founder Raoul Pal (@raoulGMI) points out, "We had the exact same correction in 2017 caused by the same reaction to Trump policies (higher dollar and higher rates which then reversed)..."
Bitcoin's Technical Confluence Zone
The iShares Bitcoin Trust ETF is approaching a critical technical confluence zone that should act as a high reward-to-risk zone for investors with a long-term investing time frame and the ability to stomach short-term volatility. IBIT shares are in the process of filling the November election gap, tagging the rising 40-week moving average, and testing the previous breakout zone.
Crypto Czar Confirms Bitcoin Is Best-in-Breed
David Sacks, the Trump Administration's "Crypto Czar" and former host of the wildly popular "All In" podcast, appeared on his old podcast last week to discuss the U.S. Strategic Bitcoin Reserve. Several times during his interview, Sacks made the critical distinction between Bitcoin and other digital assets, saying, "We've decided that Bitcoin is scarce, it's valuable, and that it's strategic for the United States to hold on to this as a long-term reserve asset."
Bitcoin's breathtaking performance confirms that it's in a league of its own. Since 2010, Bitcoin has averaged triple-digit percentage annual gains and has only recorded three down years.
The fact that the U.S. will HODL (hold on for dear life) to its roughly 200k Bitcoin is a welcome sign for investors and means that no additional supply from the government will flood the market.
Bottom Line
The likelihood of increasing M2, a high reward-to-risk technical zone, and the new "Strategic Bitcoin Reserve" suggest that crypto-related stocks like Coinbase, MicroStrategy, Robinhood, andRiot Platforms may be ready to bounce.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.