Key Facts

• Adjusting asset prices for growth in the US M2 money supply reveals a weaker picture for both bitcoin and the S&P 500 than their nominal levels suggest, with the S&P 500 only recently returning to its dot-com-era peak on a money-supply-adjusted basis.
• The BTC/M2 ratio, which adjusts bitcoin's price for money supply growth, has formed a head-and-shoulders pattern, typically read as a bearish signal, suggesting that bitcoin's exponential edge over money supply growth may be fading.
• The S&P 500 currently hovers near a record high of 7,511 points in nominal terms, but adjusted for two decades of M2 growth, it has only recently reclaimed its 2000-era high of around 1,500 points.
• Bitcoin has at times been viewed as a leading indicator for broader risk appetite, and its monetary valuation is genuinely losing ground to M2 growth, which could be an early warning that the S&P 500's nominal gains rest on a thinner foundation than they appear.
• The M2 money supply is the Federal Reserve's estimate of liquid assets, including cash on hand, money deposited in checking and savings accounts, and other short-term saving vehicles such as money market funds and certificates of deposit.