Crypto market plunges, but expert suggests end of quantitative tightening and rising M2 supply could spur recovery

Bitcoin (BTC) and the broader crypto market declines in the early European session on Friday, with the top crypto by market capitalization sliding 3.2% in the last 24 hours, alongside Ethereum (ETH) and Solana (SOL), which dips 9% and 10%, respectively. Despite the declines, HashKey Capital Director Han Xu stated that the crypto bull market looks poised for further upside, with the upcoming end of quantitative tightening (QT) and rising M2 supply signaling a potential return to bullish action.

Bitcoin, altcoins dip amid expert prediction of positive macroeconomic changes

Bitcoin briefly declines below $104,000 for the first time in the past seven days, causing its fellow top cryptocurrencies, Ethereum and Solana, to slide by about 9% in the last 24 hours. The decline triggers $1.15 billion in crypto futures liquidations.

Despite recent fears that the bull market is coming to a halt, Han Xu, director at HashKey Capital, expressed confidence that the bull market still has significant room to run, stating that the current phase is a "new mid-phase with substantial upside still ahead."

In an exclusive interview with FXStreet, Han pointed to macroeconomic trends and on-chain data as key indicators that could renew positive sentiment in crypto.

He cited that reforms to the Supplementary Leverage Ratio (SLR) and a projected end of quantitative tightening later this year could mark a turning point in the dollar liquidity cycle. Han emphasized that the end of QT represents a pivotal moment for crypto, as it signals a reversal in global liquidity conditions.

"Once QT ends — expected at the end of 2025 — we anticipate a meaningful drop in real yields, which historically correlates with risk-on behavior in both traditional and digital asset markets. Cryptocurrencies, in particular, have an outsized sensitivity to changes in global liquidity," Han told FXStreet.

"Over the past decade, major digital assets have exhibited betas above 8.5 to global money supply, significantly higher than equities or commodities. In other words, crypto tends to respond faster and more aggressively when liquidity returns," he added.

Quantitative tightening (QT) involves the Federal Reserve (Fed) reducing the money supply by shrinking its balance sheet through the sale of bonds, thereby pushing interest rates higher. Meanwhile, the Supplementary Leverage Ratio (SLR) is a regulation that requires banks to maintain 3% capital against their leveraged exposure. Several market participants expect regulators to revisit the structure in the coming months, especially with the US President Donald Trump administration favoring deregulation to boost economic growth.

An end in QT and a potential easing of the SLR could free up liquidity in the market and spur demand for risk assets again.

In addressing Bitcoin's price growth, Han acknowledged that the widely trending $1 million per BTC target may appear far-fetched. Still, he argued that it is rooted in "asset pricing logic and monetary economics." Han explained that Bitcoin is a highly inelastic asset regarding its supply, which mirrors gold but "with even tighter constraints."

Bitcoin has a supply cap of 21 million BTC, with a diminishing inflation rate every four years via its halving mechanism. Meanwhile, the global M2 money supply growth due to debasement continues to push investors to seek a reliable store of value.

As a result, Bitcoin's growing status as digital gold is becoming more firmly established with increased institutional adoption and acquisition in corporate treasuries, Han noted.

US spot Bitcoin exchange-traded funds (ETFs) have seen tremendous growth over the past year, with their cumulative net inflows rising to $45.31 billion within 17 months of launch, per SoSoValue data.

Bitcoin allocations in corporate treasuries have also skyrocketed to about $85.2 billion, spearheaded by Strategy (formerly MicroStrategy) and the companies replicating its playbook, according to BitcoinTreasuries.

Han predicts that Bitcoin's market cap could match that of tradable Gold (e.g., gold bars, coins, and ETFs) over the next decade, which would make the $1 million per BTC price target a high probability.

"The market cap of tradable gold is estimated to be approximately 25% of gold's total market value, or around $5.6 trillion. In a likely macroeconomic stagnation scenario — similar to what we observed in the 1970s — real assets such as gold experienced a compound annual growth rate (CAGR) of 30%," Han wrote.

"Assuming a more conservative annual gold price increase of 15% over the next decade, and that Bitcoin reaches the same market cap as tradable gold, a price path to $1 million per Bitcoin by 2035 is not just possible — it is mathematically defensible."

At the time of publication, Bitcoin trades at $104,400, down 3% over the past 24 hours.

(This story was corrected on June 19 at 07:33 GMT to say that Han Xu is director at HashKey Capital, not partner, and to say that Han expects quantitative easing to finish at the end of 2025, not the beginning.)