If you only look at the dollar price of your portfolio, you may be missing part of the picture, which is significantly influenced by the growth of the money supply.
To the casual observer, the markets appear to be carrying on as usual. While bitcoin has nearly halved to $66,000 from its peak of $126,000 in October last year, the drop could be dismissed as simply another brutal quadrennial cryptocurrency bear market. Meanwhile, the S&P 500 continues to hover around all-time highs.
But beneath the surface, a more interesting signal emerges when both prices adjust to the US 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 savings vehicles such as money market funds and certificates of deposit.
Monetary exhaustion?
Some observers see bitcoin as a high beta barometer of dollar liquidity, and the BTC/M2 ratio, the price of bitcoin adjusted for money supply growth, is now sounding a warning. The ratio, after a sharp rise between 2023 and 2025, appears to have formed what technical analysts call a head and shoulders pattern, which is typically read as a bearish signal.
If the pattern holds, it would suggest that bitcoin’s exponential advantage over money supply growth (the dynamic that allowed it to overcome debasement so convincingly in previous cycles) is fading. Bitcoin’s ability to overcome the flood of new dollars may be approaching diminishing returns, at least for now.
