A recent study examined the relationship between the bitcoin price and the global money supply, and noted that the two are highly correlated.
September 25, Lynn Alden, founder of Investment Strategists, reported that a recent study she commissioned evaluated the global money supply in comparison to other asset classes.
Alden's study found that #bitcoin moves toward the global money supply (M2) 83% of the time, more than any other asset.
/bitcoin shows a strong correlation with global liquidity, making it a potential liquidity barometer, the study said.
When global liquidity, as measured by indicators such as the M2 money supply, increases, the bitcoin price typically rises, and vice versa, when liquidity falls, the bitcoin price falls.
The correlation coefficient with global liquidity is 0.94 for the study period from May 2013 to July 2024, indicating that the relationship is highly sensitive.
I commissioned a research report from @samcallah to quantify bitcoin's correlation to global money creation indices compared to other asset classes.
M2 money is a measure of money supply that includes cash, settlement deposits, and easily convertible quasi-money. It also includes M1 money, which includes physical currency, savings accounts, and short-term deposits. It is also used as an indicator of the availability of money in the economy, which affects inflation, interest rates, and overall economic activity.
When comparing other assets, Mr. Alden noted that equities have income that affects correlation, while gold has a defensive potential that affects correlation.
Bitcoin is essentially seen as a risk to gold. That's why it has the highest correlation.
The researchers found that bitcoin's strong correlation with global liquidity is influenced by its high volatility, which can distort the short-term correlation.
According to the St.
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