Bitcoin’s Journey to $400K: Exploring Market Trends and Models
Current Trading Range and Recent Volatility
Over the past 24 hours, Bitcoin (BTC) has traded in a narrow band between $108,000 and $110,000 on the Bitstamp exchange. This range has remained surprisingly resilient, even after volatility spikes in January—when BTC briefly topped $109,000—and in April, when it dipped toward $75,000. Market indicators such as the 7-day realized volatility index currently hover around 60%, well below the 12-month average of 80%.
Money Supply Correlation: Model Technicals
Analyst Kyle Chassé of DD🐸 built a regression model correlating Bitcoin’s daily closing prices with global M2 money supply data, shifted forward by 90 days. Key specifications include:
- Data Sources: Federal Reserve, ECB and BOJ aggregated M2 figures; Bitstamp daily closes.
- Lag Period: 90 days, yielding an R² of 0.85 over the past five years.
- Coefficient: 0.005 BTC per $1 trillion increase in M2.
“The overlay suggests a structural relationship: when global liquidity increases, Bitcoin price often follows after roughly three months,” says Chassé.
Short-Term Price Moves
Following the April correction, BTC recovered to near $110,000. This rebound aligns with a resumed uptick in M2, which rose from $108 trillion in early 2024 to over $111 trillion by May 2025. According to the model, this implies continuation in an overarching oscillatory uptrend rather than a terminal top.
Network Fundamentals Analysis
Beyond macro liquidity, on-chain fundamentals support the bullish thesis:
- Hash Rate: Bitcoin’s network hash rate recently surpassed 350 EH/s, indicating miner confidence and securing network integrity.
- Difficulty Adjustment: The latest difficulty epoch saw a +3.2% increase, the eighth consecutive rise, reflecting robust mining competition.
- Supply Distribution: Long-term holders (holding >1 year) now control 65% of the circulating supply, the highest since 2021.
Interest Rate Scenarios and Policy Risks
While M2 growth provides tailwinds, central bank policies remain a critical risk factor. Should the Federal Reserve or ECB pivot to a hawkish stance—raising real interest rates above 2%—the discount rate applied to future crypto cash flows could compress valuations:
- Baseline Scenario: Rates remain near current levels; model target ~$400K by mid-2025.
- Hawkish Shock: A 50 bps hike would introduce ~15% downward pressure on BTC over three months.
On-Chain Metrics and Sentiment Indicators
Complementing macro analysis, on-chain sentiment metrics from Glassnode and Santiment highlight:
- Exchange Balance Declines: BTC on exchanges down 12% year-to-date, indicating reduced selling pressure.
- Funding Rates: Perpetual swap funding remains neutral-to-positive, signaling balanced leverage.
What Comes Next
With a ~90–100 day lead time based on Global Macro Investor reports, traders can align entries with M2 data releases. If M2 decelerates in the coming quarter, BTC may consolidate near $100K. Conversely, any fresh liquidity injections—quantitative easing or fiscal stimulus—could accelerate the ascent toward $400K. While the M2-BTC model isn’t a trade signal, it provides a valuable macro lens for timing strategic decisions.