If you only look at the dollar price of your portfolio, you risk missing part of the picture, which is largely shaped by growth in the money supply.
To the casual observer, markets appear to be operating as usual. While bitcoin has almost halved to $66,000 since its peak of $126,000 in October last year, the decline could be seen as simply a 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 to the US money supply M2. M2 is the Federal Reserve’s estimate of liquid assets, including cash, money deposited in checking and savings accounts, and other short-term savings instruments such as money market funds and certificates of deposit.
Monetary exhaustion?
Some observers view bitcoin as a high-beta barometer for dollar liquidity, and the BTC/M2 ratio, the price of bitcoin adjusted for money supply growth, now serves as a warning sign. The ratio, after a sharp rise from 2023 to 2025, appears to have formed what technical analysts call a head-and-shoulders pattern, generally interpreted as a bearish signal.
If the trend continues, it would suggest that Bitcoin’s exponential advantage in money supply growth – the momentum that allowed it to outpace devaluation so convincingly in previous cycles – is fading. Bitcoin’s ability to outpace the flood of new dollars may be close to diminishing returns, at least for now.
