Rising M2 money supply will see crypto become ‘supermassive black hole’: Raoul Pal

The rising M2 money supply could propel crypto into another bull rally and help it outperform the traditional markets, according to Raoul Pal, co-founder and CEO of financial media platform Real Vision. Pal’s X post highlighted the correlation between the rising fiat market supply and the start of the crypto bull run.

Pal, in an X( formerly Twitter) post, shared a graph comparing Bitcoin’s (BTC) yearly performance against the global M2 money supply, indicating the simultaneous rise of Bitcoin and global M2 supply. Historically, the Bitcoin and cryptocurrency market has started outperforming the traditional financial market with a rise in global M2 supply.

Bitcoin vs Global M2 supply. Source: Global Macro Investor

The chart above shows that Bitcoin’s price is on the verge of decoupling from the traditional market with a rising M2 supply, which has been the case historically, evident from the spike in BTC’s performance in 2021, 2017 and 2014.

Bitcoin/NDX vs Global M2 supply. Source: Global Macro Investor

Pal said he “loves Global M2… this is when BTC outperforms the NDX and crypto becomes the Super Massive Black Hole.”

The total money supply (M2) is the amount the U.S. Federal Reserve estimates to be in circulation. The M2 supply comprises all cash that people own and all money placed in savings accounts, checking accounts, and other short-term savings instruments like certificates of deposit (CDs).

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A Bitcoin bull run is often linked to the block reward halving every four years, with the next one scheduled for April 2024, as it reduces the market supply of BTC against growing demand. However, halving is not the sole factor behind the surge, as several macroeconomic factors also play a key role.

Over the past decade, the Bitcoin price has made significant gains during the fast growth of money supply (M2), owing to a reduction in interest rates, quantitative easing and fiscal stimulus. On the contrary, during times of monetary tightening by central banks, the cryptocurrency market has struggled to gain bullish momentum. The 2021 bull market coincided with 6% or higher aggregate M2 money supply growth of the Fed, ECB, BOJ and PBOC.

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