What does the Bitcoin – M2 supply correlation mean, for the U.S. dollar?


Last Thursday, the U.S dollar surged ahead of a basket of currencies, after data suggested that producer prices had recorded their largest annual increase in more than 10 years. Inflation pressures remain strong in this context, and over time, the increasing interest in Bitcoin has led to many other discussions.

Many analysts have contemplated on Bitcoin’s characteristics to act as a hedge during inflation but its volatility factor usually acts as a counter-argument. In order to understand if there is co-dependence in this area, this article analyzes  BTC’s movement with respect to M1 and M2 supply.

Is Bitcoin correlated with other non-liquid assets now?

Now, M1 and M2 indicate the monetary growth of the U.S dollar. M1 dictates the growth of liquid cash and coins in circulation in the market, whereas M2 is the broad combination of liquid and non-liquid assets. As M2 encompasses a wider range of assets, it is usually taken as an indicator of total money supply and future inflation.

BTC/USD on Trading View

Now, according to the chart above, it can be observed that the M2 supply and Bitcoins’ price movements have aligned over the past year, while the U.S dollar continued to have an inverse relationship with the digital asset. So right now, it can be inferred that Bitcoin adheres to the control on a wider list of digital assets than only…



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