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Onchain Economics

Bitcoin vs M2 Money Supply

Compare Bitcoin price to the US M2 money supply. Adjust the offset to test the hypothesis that Bitcoin price follows liquidity changes with a lag.

Time Range:
Bitcoin Offset (days ahead of M2):
Custom Offset: 90 days
View Mode:
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Bitcoin (solid line = current date)
Bitcoin (dashed = offset 90 days ahead)
M2 Money Supply
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About This Dashboard

This dashboard explores the relationship between Bitcoin price and the US M2 money supply. Many analysts argue that Bitcoin, as a scarce digital asset, responds to changes in monetary liquidity with a lag of several months.

The Liquidity Thesis

The core hypothesis is that when central banks expand money supply (increase M2), excess liquidity eventually flows into risk assets like Bitcoin. Conversely, when M2 contracts or growth slows, Bitcoin may face headwinds.

  • Typical lag: Analysts suggest Bitcoin responds to M2 changes with a lag of 60-150 days
  • Use the offset slider to shift Bitcoin data forward in time and test which lag produces the strongest correlation
  • Normalized view allows direct comparison of percentage changes by indexing both series to 100 at the start

Understanding the Offset

The "Bitcoin offset" shifts Bitcoin price data forward relative to M2. For example, with a 90-day offset, you're comparing today's M2 to where Bitcoin was 90 days ago. This helps visualize whether M2 changes "predict" Bitcoin movements.

Correlation Interpretation

  • >70%: Strong correlation - M2 changes appear to predict BTC movements at this lag
  • 40-70%: Moderate correlation - some relationship exists but other factors are significant
  • <40%: Weak correlation - the relationship is not strong at this offset

Limitations

  • Correlation does not imply causation
  • Bitcoin price is influenced by many factors beyond liquidity (regulation, adoption, technology, sentiment)
  • M2 is a US metric; global liquidity may be more relevant
  • The optimal lag varies over time and across market cycles
  • Historical patterns may not predict future behavior

Related Tools

Explore Further

Data sources: CoinGecko (Bitcoin prices) and Federal Reserve Economic Data (FRED) (M2SL series).