Forget the price charts. Here's how bitcoin and S&P 500 look like when adjusted for the money printer
Key takeaways
- To the casual observer, the markets look like business as usual.
- But beneath the surface, a more interesting signal emerges when both prices are adjusted for the U.S.
- Some observers see bitcoin as a high-beta barometer for dollar liquidity, and the BTC/M2 ratio, bitcoin's price adjusted for money supply growth, is now flashing a warning.
M2 money supply reveals a weaker picture for both bitcoin and the S&P 500 than their nominal levels suggest.On a money-supply-adjusted basis, the S&P 500 has only recently returned to its dot-com-era peak.If you're only looking at the dollar price of your portfolio, you may be missing part of the picture, which is significantly shaped by money supply growth.
To the casual observer, the markets look like business as usual. While bitcoin has nearly halved to $66,000 since its $126,000 peak in October of last year, the decline could be dismissed as just another brutal, quadrennial crypto bear market. Meanwhile, the S&P 500 continues to hover near record highs.
But beneath the surface, a more interesting signal emerges when both prices are adjusted for the U.S. M2 money supply. M2 is the Federal Reserve's estimate of liquid assets, including cash on hand, money deposited in checking and savings accounts, and other short-term saving vehicles such as money market funds and certificates of deposit.