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Bitcoin On-chain Insights: Exploring The Global M2 Money Supply And MVRV Z-Score

Last Updated February 16, 2024 2:22 PM
Andrew Kamsky
Last Updated February 16, 2024 2:22 PM
By Andrew Kamsky
Verified by Peter Henn

Key Takeaways

  • Expansion in M2 correlates with Bitcoin’s bullish cycles, highlighting inflation hedge appeal.
  • A drop in M2 liquidity often signals the end of Bitcoin’s bear cycles, underscoring macroeconomic influence.
  • Diminishing peaks in MVRV Z-score suggest a stabilizing Bitcoin market with reduced volatility and returns.
  • A gradual increase in Bitcoin’s realized price reflects a mature market with long-term holding trend.

Matt, an on-chain expert from LookIntoBitcoin , highlighted some insights for investors and speculators strategizing on Bitcoin investments. His expertise in deciphering through complex on-chain data offers a unique perspective on the cryptocurrency market. This provides investors with knowledge of some of the fundamentals that govern the Bitcoin price based on wider macro events.

Global M2 Money Supply Vs. Bitcoin

The global M2 money supply serves as an indicator of the liquidity available in an economy. There is also relationship between the expansion of the M2 money supply and Bitcoin’s price movements. 

Specifically, periods of exponential increase in M2 have coincided with bullish cycles in the Bitcoin price. This suggests that inflationary pressures and increased money printing post-COVID-19 have driven investors towards Bitcoin as a hedge against inflation.


Global M2 Money Supply vs. Bitcoin
Global M2 Money Supply vs. Bitcoin

When the M2 supply begins to plateau or decrease, signaling a reduction in liquidity, Bitcoin has historically found its bottom.  This pattern underscores the importance of macroeconomic conditions in shaping the cryptocurrency landscape. This is where Bitcoin emerges as a beneficiary of shifts in global monetary policy .

On-Chain Metrics: MVRV Z-Score And Realized Price

When understanding Bitcoin’s ecosystem, on-chain metrics offer an aerial view of market sentiment and potential price directions. The MVRV Z-score, which measures the market value to realized value, helps identify periods of overvaluation or undervaluation. Observations of diminishing peaks in the MVRV Z-score suggest a maturing market with diminishing volatility and returns, aligning with the broader trend of Bitcoin’s growth and adoption.

On-Chain Metrics: MVRV Z-Score And Realized Price
On-Chain Metrics: MVRV Z-Score And Realized Price

A slower increase in the realized price compared to previous cycles indicates a more stable and mature market, with a significant portion of Bitcoin being held long-term and not subject to frequent trading.

On-chain Implications On Longer Term Technical Analysis

The interplay between macroeconomic indicators, such as the M2 money supply, and on-chain metrics like the MVRV Z-score  and realized price, provides a fundamental overview to carry out technical analysis and identify trends. The current landscape suggests a Bitcoin market that is becoming more resilient to volatility, with a potential for gradual upward trends rather than the explosive cycles of the past. 

Investors and analysts can consider the above factors when strategizing over the long term, recognizing diminishing returns in peak periods but also increasing stability and potential for long-term growth.


​​The information provided herein is for educational and informational purposes only and should not be construed as financial advice, investment recommendation, or an offer or solicitation to buy or sell any securities. Cryptocurrency investments are volatile and high risk in nature, do not invest more than you can afford to lose. 

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