Bitcoin and the U.S. M2 Money Supply: A Key to Market Health

Mark Moss, a cryptocurrency enthusiast and radio host, believes Bitcoin is the ultimate indicator of overall market health. He challenges the traditional focus on earnings and economic data, arguing that liquidity is the key metric that moves the market.

M2 Money Supply and Bitcoin Positively Correlate

Moss points to the stellar record of billionaire investor Stanley Druckenmiller, whose firm has averaged about 30% in annual return simply by following liquidity. Druckenmiller emphasizes that liquidity, not earnings or other fundamental indicators, moves the market.

A chart shared by Moss shows a close positive correlation between the M2 money supply in the United States and Bitcoin prices since 2013. Moss believes this solid market data shows Bitcoin is a reliable gauge of tracking overall market health.

Bitcoin Outperforms Traditional Assets

Bitcoin has outperformed traditional assets in recent years, rallying nearly 10X since early March 2020 when the U.S. Federal Reserve began intervening in the market due to the impact of COVID-19. This is because Bitcoin is driven by supply and demand dynamics, which are massively shaped by liquidity conditions.

Monitoring Bitcoin’s Price Action

Moss argues that investors can gain valuable insights into the overall market sentiment towards risk and liquidity by monitoring Bitcoin’s price action. BTC prices tend to rise whenever the market is optimistic and liquidity is rising or expected to recover.

Bitcoin’s Future

The coin is currently trading above $46,500, and market participants are optimistic about further gains in the weeks ahead. However, it remains to be seen how Bitcoin prices will evolve in the immediate term.