Bitcoin’s Price Correlates with Global M2 Money Supply, Says Raoul Pal

Raoul Pal, co-founder of Real Vision, claims Bitcoin’s price closely follows global M2 money supply trends, showing a strong correlation of nearly 89%. He argues that liquidity expansion from global monetary stimulus is a key driver of Bitcoin’s value, despite recent volatility. Pal’s analysis suggests Bitcoin will continue to rise as long as M2 expands, reinforcing its role as a hedge against fiat currency debasement.

Bitcoin’s price dynamics are increasingly resembling patterns in global money supply, according to insights from Raoul Pal, a prominent analyst and co-founder of Real Vision. Pal recently showcased a chart demonstrating a striking 89% correlation between Bitcoin’s price fluctuations and the growth of the global M2 money supply over the past two years.

The M2 measure encompasses cash and liquid assets like checking deposits that can be quickly converted into cash. Recent surges in M2 can be attributed to extensive monetary stimulus and worldwide money printing initiatives. Pal contends that this influx of liquidity is primarily responsible for the upswings in Bitcoin’s price, characterising most news and updates from the market as mere “noise.” He posits that Bitcoin actually serves to debase the U.S. dollar, functioning as a macro asset intrinsically linked to increases in fiat currency supply.

This theory was put to the test when Bitcoin faced a sudden selloff recently. The cryptocurrency plummeted more than 4% on Friday, dropping from over $108,000 to around $103,000 within just a few hours, coinciding with escalating military tensions in the Middle East. Even though there was a brief recovery exceeding 2%, the gains did not sustain, as volatility surged back into view.

Regardless of the recent short-term dip, Pal’s model suggests that Bitcoin’s long-term price outlook remains positive as long as M2 continues to rise. His analysis reinforces the growing narrative of Bitcoin as a safeguard against fiat currency depreciation, positioning it as an asset class driven by liquidity rather than mere reactions to fleeting headlines.

As interest from institutional investors swells and the cycles of macro liquidity persist in shaping financial landscapes, analysts like Pal anticipate that Bitcoin’s price will continue to be closely tethered to global monetary policies and money supply patterns. This trend may solidify its status as a vital macroeconomic indicator in our increasingly digital world.