Analysts are eyeing a less conventional indicator to predict Bitcoin’s trajectory: the M2 money supply, where M2 corresponds to the total number of different currency and commercial paper units in circulation.  This metric, the sum of all the marketable US cash and short-term money in circulation, has a trend similar to Bitcoin’s bullish cycles, thus […]

Analysts are eyeing a less conventional indicator to predict Bitcoin’s trajectory: the M2 money supply, where M2 corresponds to the total number of different currency and commercial paper units in circulation. 

This metric, the sum of all the marketable US cash and short-term money in circulation, has a trend similar to Bitcoin’s bullish cycles, thus creating doubt about its future role as an influencer in the market.

Also read: Bitcoin bullish trend

Historical correlation of US money supply and  Bitcoin’s rally

As with the markets and considering their historical data, the growth of M2 money supply may be a tool for boosting BTC’s rally. In referring to his recent analysis, Jamie Coutts, a crypto analyst, explains why strength in the US dollar is strongly correlated with weakness in cryptocurrencies. 

Among the multiple parameters Coutts mentions in his Bitcoin/Liquidity framework, M2 – a measure of the aggregate money supply in circulation globally—is the index globally showing the strongest association with Bitcoin’s bull cycle

Importance of money supply rate change to Bitcoin

The amount of money required will not be the most crucial point to this change, but the rate at which the amount is set. Coutts underlines that the speed of the M2 volume variations and Bitcoin price interrelations are the most significant factors here rather than absolute quantities.

The central banks view a rise in this reading as a positive signal of a potential improvement in conditions. Developments related to the M2 money supply have become so significant that even investors cannot resist paying attention. 

By the end of May 2033, M2 money stock exhibited a positive increase in annual comparisons for the first time since November 2023. This turnaround hints at a possible channel control change as investors are convinced to invest less in assets like Bitcoin due to inflation.

Source:ycharts

 Dollar dynamics and Bitcoin

 In addition to the M2 amount, which analysts watch for signs of a market catalyst, they also pay attention to the USD behavior, which is prone to have a big effect on the Bitcoin price dynamics. 

Also read: US dollar weakens

Coutts mentioned that the dollar’s movement determines the direction of Bitcoin’s growth or fall, explaining that the slump below the 101 barrier will strengthen the upward trend. The dollar has traded in a narrow range, sending waves of fear among market players. They are all focused on the charts and looking for levels of support, hoping to either prolong the status quo or begin a corrective trend.

Source: Trading View