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According to Raoul Pal, the CEO of financial media platform Real Vision, the increasing total money supply (M2) could lead to a new rally in the crypto sector and result in better performance than traditional markets. Pal’s post highlights the relationship between rising fiat market supply and the beginning of a crypto bull run.
Notable Analysis for Bitcoin
Raoul Pal shared a graph comparing the annual performance of Bitcoin with global M2 money supply on social media platform X, showing the simultaneous rise of Bitcoin and global M2 supply. Historically, the crypto market, led by Bitcoin, has outperformed traditional financial markets with the increase in global M2 supply.
The graph above indicates that Bitcoin’s price is on the verge of diverging from traditional markets due to the increase in M2 supply, as seen from the price performance increase in 2021, 2017, and 2014.
M2 data is the total money supply estimated by the United States Federal Reserve, including all cash held by individuals, savings accounts, deposit certificates, and checking accounts, among other short-term savings instruments.
Possible Scenarios for Bitcoin
A potential Bitcoin rally is often associated with the halving event, which occurs approximately every four years and reduces Bitcoin’s market supply against increasing demand. The next halving event is expected to take place in April 2024. However, various macroeconomic data also play a significant role, and halving is not considered the sole factor for Bitcoin’s price.
In the past decade, the price of Bitcoin has experienced significant gains during the rapid growth of M2 due to decreasing interest rates, quantitative easing, and fiscal stimulus. Additionally, the crypto market struggled to gain momentum during periods of monetary tightening by central banks. The 2021 bull market accompanied a total M2 growth of 6% or higher in the Federal Reserve, European Central Bank, Bank of Japan, and People’s Bank of China.
