A financial analyst has publicly criticized the use of global M2 money supply data to predict Bitcoin (BTC) price movements, calling such analyses mathematically unsound and misleading.
The criticism comes amid a surge in the global M2 money supply to an all-time high. Several analysts are forecasting similar trends for BTC.
Is Global M2 Money Data a Reliable Predictor for Bitcoin Price Movements?
The analyst, known as TXMCtrades, shared his thoughts on X (formerly Twitter). He specifically pointed to a chart by macro investor Raoul Pal that compared Bitcoin’s price to global M2.
TXMCtrades argued that charting global M2 daily or weekly is fundamentally flawed due to the inconsistent update frequencies of the underlying data. According to him, doing so distorts the information by amplifying short-term fluctuations instead of providing an accurate, long-term trend.
“People, you can’t create a daily or weekly time series of “Global M2” when the United States is only updating M2 on a weekly basis and all others are monthly!” the post read.
He explained that many countries have yet to update their figures beyond February, creating significant gaps in the dataset. TXMCtrades contended that this inconsistency results in a metric that largely reflects foreign exchange (FX) fluctuations rather than actual money supply dynamics.
“You’re looking at an M2 weighted inverse dollar exchange rate 95% of the time. Be better at math!” he added.
He also highlighted broader concerns about the misuse of global M2. The analyst stressed that China, which constitutes 46% of global M2, is the only major economy with a broad money supply above its post-COVID peak in dollar terms.
“They are currently trying to ease out of an ongoing multi-year debt deflation and doing a pretty shit job of it. Their M2 goes straight up,” TXMCtrades remarked.
Meanwhile, US M2 remains below its 2022 peak. In addition, the analyst emphasized that it is growing at its slowest pace since Bitcoin’s inception, excluding the 2022-2024 period. This suggests that the US is not experiencing rapid money supply growth, which could impact inflation or other economic trends.
This disparity, TXMCtrades argues, further undermines the reliability of global M2 as a predictor of Bitcoin price movements. The analyst also disputed the use of “random offsets” to align global M2 with Bitcoin price movements, a method employed by several analysts.
For instance, Raoul Pal has suggested a 12-week lag between global M2 and Bitcoin’s price. Meanwhile, Colin Talks Crypto proposes a 15.4-week lag. Meanwhile, Mr. Wall Street estimates the lag to be between 10.7 and 15 weeks. Some have even extended the M2 correlation to predict altcoin prices, such as Solana (SOL).
“SOL has been following Global M2 Money Supply (+100 days) its last two legs up. If this continues, SOL is set to pump massively within the next 2 weeks,” analyst Curb posted.
Nonetheless, the analyst stated that offsets are often arbitrary and don’t reflect the actual dynamics of money supply or asset prices.
“Money is money, it doesn’t have a wait time,” he claimed.
The analyst suggested that such models are overfitted to recent historical data and lack a strong foundation for forecasting. Lastly, TXMCtrades called for greater rigor in financial analysis. He urged analysts to “stop proliferating scammy analysis” and adopt more mathematically sound approaches to understanding cryptocurrency price dynamics.
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