Bitcoin Price & M2 Supply Growth

What M2 is, and why Bitcoin readers watch it

M2 is a measure of the money in an economy that is cash or close to it: notes and coins, current accounts, savings deposits and other balances that can be spent without much delay. Central banks publish it monthly. Add the major economies together, converted into dollars, and you have global M2: a rough gauge of how much money exists to be spent or invested anywhere.

The argument for watching it beside Bitcoin is simple. Bitcoin has a fixed supply and no yield, so its price is set almost entirely by how much money is looking for a home in it. When broad money grows quickly there is more of it looking, and when growth stalls there is less. The chart lets you check that argument against the record instead of taking it on faith.

How to read the chart

• The lime line is Bitcoin on a log scale, so a doubling is the same height whether it happens at $10,000 or $100,000.
• The white line is M2 growth, year on year: It is a rate, not a level: above zero the money supply is larger than a year ago, below zero it is smaller. Its scale is on the left.
• Global or US: Global M2 aggregates the major economies and moves with exchange rates as well as with central banks. US M2 is one economy, one currency, and the one most often quoted. They usually agree on direction and disagree on timing.
• Shift M2 forward: A popular reading holds that liquidity leads Bitcoin by roughly ten to thirteen weeks. The control draws the growth line that many days later than it happened, so a turn in liquidity sits over the price move said to follow it. Shifted, the line runs past today: that dashed stretch is M2 that Bitcoin has not traded yet, which is the reason people draw the chart this way. It is a visual shift, nothing more.
• How closely they move together: The line under the controls gives the correlation between M2 growth and Bitcoin's own year-on-year change over the whole history, at the shift you chose, and says which shift fits best. Read it before trusting any lead: if no shift beats "Off", the chart is telling you the lead is folklore for that series.
• The ribbon under the chart colours every date by its liquidity regime, the same four states as the table below, so you can see what Bitcoin was doing in each.
• Where the data stops: Money supply is reported weeks in arrears. The M2 line ends at its last figure; Bitcoin runs on to today. The Bitcoin tile in the header says how far it has moved since that last figure.

The liquidity regimes

The table sorts every point in the series into one of four states from two questions: is M2 growth positive, and is it higher than three months earlier. For each state it reports the share of time spent there, the median Bitcoin return 30, 90 or 180 days later, the share of those returns that were positive, and how many there were. The row marked Now is the state of the latest figure. It is a description of the record, not a forecast. Regimes overlap with market trends, consecutive days are not independent observations, and the series is short by the standards of monetary history.

What it cannot tell you

• M2 is published monthly and revised. A daily-looking line is a monthly figure carried forward between prints.
• Global M2 in dollars rises when the dollar falls, even if no central bank has printed anything. Part of what the line shows is the currency, not the money.
• The lead is a claim about the past that fits some cycles better than others. Shifting a line until it overlays another is not evidence of cause.
• Liquidity is one input among many. Halvings, ETF flows, leverage and regulation have all moved the price without a change in M2.