MacroIntermediate#Liquidity#Fed
M2 Money Supply
M
Definition
A measure of the money supply that includes cash, checking deposits, and easily convertible 'near money' like savings and money market funds.
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Concept Diagram
Key Takeaways
1
M2 is the broadest measure of 'spendable liquidity' — including cash, deposits, and easily convertible near-money.
2
Bitcoin has a near 0.9 correlation with global M2 growth over structural timeframes — the most reliable macro predictor.
3
When M2 expands via QE or stimulus, more dollars chase a fixed 21M BTC supply, pushing the BTC/USD price up.
4
The combined M2 of the US, China, and Europe — not just US M2 — is the true driver of crypto bull markets.
Practical Example
Global M2 expands from $100T to $110T (+10%) over 12 months. Historically, BTC responds with a 40-60% rally within the same period. Traders tracking M2 growth bought BTC at $27,000 and rode it to $44,000 as the liquidity expansion confirmed.
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Related Terms
Strategy
CPI (Consumer Price Index)A key macro metric for inflation that drives the Federal Reserve's interest rate decisions, directly impacting risk assets like BTC.
Macro
Quantitative Easing (QE)A monetary policy where a central bank purchases government securities to increase money supply and encourage lending/investment.
Macro
Cantillon EffectThe principle that the first recipients of new money (usually banks/institutes) benefit more than those who receive it later after prices rise.
Macro
Risk-On / Risk-OffA market paradigm where investors either flock to high-yield risk assets (Risk-On) or seek safety in cash/gold/bonds (Risk-Off).
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