Cryptocurrency enthusiast and radio host Mark Moss touts bitcoin as the definitive indicator for gauging the overall health of the market. Moss questioned the traditional focus on profits and economic data.
Follow the positive correlation between money, M2 supply and bitcoin
In a post on X, Moss reiterated this trailer highlighting the stellar record posted by billionaire investor Stanley Druckenmiller. In 20 years, the radio host notes that Druckenmiller's company has averaged about 30% annual returns simply by following liquidity.
Previously, the billionaire investor revealed that they generally follow liquidity, a key metric decided by the US Federal Reserve Board. Druckenmiller also emphasized that liquidity, not earnings or other fundamental indicators, is what moves the market.
To reiterate and demonstrate that this approach works, Moss shared a chart showing the relationship between the M2 money supply in the United States and the bitcoin price trend since 2013. The analyst is confident that strong market data shows that bitcoin is a reliable indicator of tracking the overall health of the market, considering its close positive correlation with M2 supply.
Bitcoisdata points out that the M2 money supply pink approximately 38% in the last four years. During this time, bitcoin rallied, outperforming the rest of the market. Since early March 2020, when the US Federal Reserve began to intervene, cutting rates due to the impact of COVID-19, btc has rallied almost 10 times. Meanwhile, the stock market, fueled by free money, also grew strongly.
Unlike traditional assets whose valuation is tied to metrics like earnings or macroeconomic data like interest rates, bitcoin is driven by supply and demand dynamics. This relationship is largely determined by liquidity conditions, primarily dictated by the US central bank.
Eyes on the Federal Reserve, where is btc headed?
Based on this dynamic, Moss maintains that investors can gain valuable insights into the overall market sentiment towards risk and liquidity by monitoring bitcoin price action.
btc prices tend to rise when the market is optimistic and liquidity increases (or is expected to recover). The currency has been rising in recent months after the US Federal Reserve told markets it expects to cut rates for the first time in months. The improvement in labor market conditions, the strengthening of the economy and the gradual reduction of inflation indicators advise the central bank to change its monetary policy.
In the immediate term, it remains to be seen how bitcoin prices evolve. The coin remains firm as of writing, moving above $46,500. Market participants are optimistic and expect more gains in the coming weeks.
Featured image from Canva, TradingView chart
