Bitcoin Becomes a Key Liquidity Barometer Related to Global Money Supply Trends A Study

Coin World Report:
On September 25th, Lyn Alden, the founder of Lyn Alden Investment Strategy, announced that she recently commissioned a research paper to measure the relationship between global currency creation and other asset classes.
Alden’s paper shows that Bitcoin develops towards the direction of global money supply (M2) in 83% of the time, more than other assets.
The research shows a strong correlation between Bitcoin and global liquidity, making it a potential “liquidity barometer.”
Note: Bitcoin liquidity barometer measures through the expansion of global liquidity
M2 money supply
Bitcoin prices usually rise as global liquidity expands; conversely, it tends to decline when liquidity tightens.
During the research period from May 2013 to July 2024, the study shows a correlation coefficient of 0.94 with global liquidity, indicating a highly sensitive relationship.
I commissioned a research report by @桑卡拉 to quantify the correlation of Bitcoin with global currency creation indicators relative to other asset classes.
Result: Bitcoin moves in the direction of global M2 83% of the time; more than other assets.
https://t.co/ODKNqvzdis
pic.twitter.com/8710g6NKqr
–Lyn Alden (@LynAldenContact) September 24, 2024
M2 money is an indicator that measures the money supply, including cash, check deposits, and easily convertible currencies. It includes M1 money, which consists of physical currency, savings accounts, and short-term deposits. It is also used as an indicator of available funds in the economy, affecting inflation, interest rates, and overall economic activity.
When comparing other assets, Alden commented that the returns of stocks would affect their correlation, while gold has a “defensive” nature, which affects its correlation.
“Essentially, Bitcoin is seen as the risk of gold. Therefore, it has the highest correlation.”
Researchers found that the strong correlation between Bitcoin and global liquidity is influenced by its high volatility, which may distort its short-term correlation.
The conclusion of this paper is that this correlation with global liquidity makes Bitcoin a “precious macroeconomic barometer for investors and traders.”
“People can see Bitcoin as a mirror reflecting the speed of global currency creation and the relative strength of the US dollar.”
Earlier this year, Lyn Alden predicted that the price of Bitcoin would reach $200,000 within two years.
M2 growth
Earlier this week, market analyst “Game of Trades” told his 247,000 followers that M2 money supply has started to expand after reaching the most severe contraction level since 1960.
Warning: M2 money supply is now in the expansion phase
After reaching the deepest contraction level since 1960
pic.twitter.com/DX8eXo1ytC
–Game of Trades (@GameofTrades_) September 23, 2024
According to data from the St. Louis Federal Reserve, M2 money supply started to contract in March 2022 and began to increase again in March 2024. Currently, this figure in the United States is $21.17 trillion, growing by 2% in the past six months.
As many analysts believe, the impact on the price of Bitcoin is very optimistic, predicting that the bull market in the cryptocurrency market will start in the fourth quarter.