Why Bitcoin isn’t rising as fast as global M2 money supply anymore as the dollar squeezes markets
Bitcoin's price is no longer directly correlated with global money supply (M2) due to the stronger dollar and faster tightening financial conditions.Summary
Bitcoin traders historically relied on the correlation between global M2 money supply and its price, expecting increased liquidity to drive up value. However, this relationship is currently disrupted. While the global M2 is still increasing, a strengthening dollar is tightening financial conditions at a faster rate, offsetting the positive impact of increased liquidity. The dollar's impact is felt more quickly, as it operates on a different timescale than the monthly M2 measurements. Factors like geopolitical stress, oil shocks, and shifting expectations regarding Federal Reserve rate cuts are contributing to dollar strength. This means Bitcoin is reacting to the speed of change in the dollar, rather than solely the direction of the M2 supply. The article suggests that if the dollar stabilizes or weakens, the M2 tailwind could reassert itself, but if dollar strength persists, Bitcoin may continue to diverge from the historical correlation with M2.
(Source：CryptoSlate)