Examining the Reliability of Global M2 Data in Bitcoin Price Predictions

A financial analyst, TXMCtrades, criticises the use of global M2 data for predicting Bitcoin prices, claiming it is mathematically unsound. He highlights issues with data consistency and the arbitrary nature of offsets used by analysts. Furthermore, he points out that the US M2 is growing at its slowest rate and warns against misleading analyses that could distort market understanding.

A financial analyst has raised concerns regarding the reliability of global M2 money supply data for predicting Bitcoin (BTC) prices, deeming such analyses mathematically unsound. This critique comes as global M2 experiences a surge, prompting several analysts to make bullish predictions for Bitcoin.

TXMCtrades, the analyst in question, expressed his views on X (formerly Twitter), referring to a chart shared by macro investor Raoul Pal that juxtaposes Bitcoin’s price with global M2 figures. He argued that using global M2 data on a daily or weekly basis is fundamentally flawed due to varied update frequencies across countries, which distorts the information and highlights short-term fluctuations rather than long-term trends.

He pointed out that the United States updates M2 weekly while other countries do so on a monthly basis, resulting in data gaps. According to TXMCtrades, this inconsistency causes the metric to reflect foreign exchange (FX) fluctuations instead of actual monetary supply dynamics. He stressed that much of the information available corresponds more closely to an M2 weighted inverse dollar exchange rate.

Moreover, TXMCtrades raised alarm about the overemphasis on global M2, particularly noting that China, which represents 46% of global M2, continues to increase its money supply while struggling to address its persistent debt deflation. In contrast, he noted that US M2 has not reached its peak since 2022 and is growing at its slowest rate since Bitcoin’s inception, indicating a potential lack of inflationary pressure.

Furthermore, he critiqued various analysts’ methodologies that approximate offsets between global M2 and Bitcoin price changes, identifying them as arbitrary. For instance, while Raoul Pal and others suggest lags between 10.7 and 15.4 weeks to align global M2 with Bitcoin, TXMCtrades emphasised that money does not require a wait time, which he argues undermines such approaches.

He believes analysts often overfit models based on recent historical data without a solid predictive basis. In closing, TXMCtrades advocates for more rigorous analysis in financial forecasting to improve understanding of cryptocurrency price movements and to eliminate misleading interpretations of data.