Bitcoin vs the M2 Money Supply (Live)
The liquidity thesis. When central banks expand the money supply, the argument goes, Bitcoin rises.
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Bitcoin on a log scale against US M2 money supply. Green shading marks months they moved the same direction, red marks opposite directions.
Drag across the chart to zoom into any span. Reset zoom to go back.
The most popular macro explanation for Bitcoin is liquidity. M2 is a broad measure of the money supply, and the thesis is that when there is more money in the system, more of it flows into scarce assets like Bitcoin. Over the long arc there is something to it. Both lines climb over time, and Bitcoin's biggest bull runs have coincided with aggressive monetary expansion.
But the relationship is loose. The year-over-year correlation shown here is positive yet modest, and there are long stretches where the two diverge outright. Bitcoin has rallied while liquidity was flat and fallen while it grew. Treating M2 as a precise timing tool has burned people repeatedly.
The useful takeaway is directional. Liquidity is a tailwind or a headwind, not a trigger.
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