If you only look at the dollar price of your portfolio, you may be missing a part of the picture that is significantly shaped by the growth of the money supply.
To the casual observer, the markets look like business as usual. While bitcoin has nearly halved to $66,000 since its peak of $126,000 last October, the decline can be dismissed as just another brutal four-year 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 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 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, bitcoin’s price adjusted for money supply growth, is now flashing a warning. The ratio, after a sharp rise from 2023 to 2025, appears to have formed what technical analysts call a head-and-shoulders pattern, typically read as a bearish signal.
If the pattern holds, it suggests that bitcoin’s exponential advantage over money supply growth — the momentum that allowed it to so convincingly outrun the decline in previous cycles — is fading. Bitcoin’s ability to outpace the flood of new dollars may be approaching diminishing returns, at least for now.
