Global M2 MONEY SUPPLY VS GLOBAL LIQUIDITY

Which is the best to track ₿itcoin price action?

Lots of macro gurus have been arguing over the two.

For comparison, I have indexes for both metrics on a 12-Week Lead, tracking the 4 largest central banks:

The Federal Reserve (including TGA & RRP), People’s Bank of China, European Central Bank and Bank of Japan.

Let’s start by defining each.

Global M2 Money Supply covers physical cash in circulation and cash equivalents such as checking and savings deposits, as well as money market securities.

Global Liquidity covers a broader measure of liquid assets driven by central bank balance sheets, private sector financial activity (e.g., lending, corporate cash), and cross-border capital flows.

Historically, both move closely in lock-step and act as a great leading indicator for ₿itcoin, however we can see that Global Liquidity can have more drastic fluctuations.

We saw a large divergence in BTC PA with both metrics when the Blackrock iShares ₿itcoin ETF appeared on the DTCC list, a procedural step signaling progress toward potential approval.

When you look at the charts of all three, you can see there are points where either metric might follow BTC PA a bit closer, so in the end I would say it’s best to track both to find confluence in the signal.