Historically, the cryptocurrency market has benefited from the rise in global money supply, as the majority of bull runs in the past coincided with the rise in fiat supply.
The rising total money supply (M2) could propel crypto into another bull rally and help it outperform the traditional markets, according to Raoul Pal, co-founder and CEO of financial media platform Real Vision. Pal’s X post highlighted the correlation between the rising fiat market supply and the start of the crypto bull run.
Pal, in an X (formerly Twitter) post, shared a graph comparing Bitcoin’s (BTC) yearly performance against the global M2 money supply, indicating the simultaneous rise of Bitcoin and global M2 supply. Historically, the Bitcoin and cryptocurrency markets have started outperforming the traditional financial markets with a rise in global M2 supply.
The chart above shows that Bitcoin’s price is on the verge of decoupling from the traditional market with a rising M2 supply, which has been the case historically, as evident from the spike in BTC’s performance in 2021, 2017 and 2014.
Pal said he “loves Global M2… this is when BTC outperforms the NDX and crypto becomes the Super Massive Black Hole.”
The M2 is the amount the United States Federal Reserve estimates to be in circulation; it comprises all cash that people own and all money placed in savings accounts, checking accounts and other short-term savings instruments like certificates of deposit.
A Bitcoin bull run is often linked to the block reward halving every four years, with the next one scheduled for April 2024, as it reduces the market supply of BTC against growing demand. However, the halving is not the sole factor behind the surge, as several macroeconomic factors also play a key role.
Over the past decade, Bitcoin’s price has made significant gains during the fast growth of M2, owing to a reduction in interest rates, quantitative easing and fiscal stimulus. On the contrary, during times of monetary tightening by central banks, the cryptocurrency market has struggled to gain bullish momentum. The 2021 bull market coincided with 6% or higher aggregate M2 growth at the Fed, European Central Bank, Bank of Japan and People’s Bank of China.