Is Global M2 Data Misleading Bitcoin Forecast? Analyst raises warning signs

A financial analyst has criticized the use of global M2 money supply data to predict Bitcoin (BTC) price movements, arguing that these analyses lack mathematical basis and can be misleading.

This criticism comes amid the global M2 money supply reaching an all-time high, while some analysts are forecasting similar trends for BTC.

Is global M2 data a reliable indicator of Bitcoin price movement?

The analyst, known as TXMCtrades, shared his views on X. He was particularly critical of a chart by macro investor Raoul Pal, comparing the price of Bitcoin to the global M2.

TXMCtrades argues that making a global M2 chart by week or day is a fundamental mistake due to the heterogeneous frequency of updates of the underlying data. According to him, this distorts information, amplifying short-term volatility instead of providing accurate long-term trends.

“People, it is impossible to create a daily or weekly time series of ‘global M2’ when the US only updates M2 weekly and other countries are monthly!” the post stressed.

He explained that many countries have yet to update their figures after February, leading to significant gaps in the dataset. TXMCtrades argues that this inconsistency causes the index to primarily reflect foreign exchange volatility (FX) rather than actual money supply dynamics.

“You’re looking at the inverse exchange rate of M2 95% of the time. Be better at math!” he added.

He also highlighted broader concerns about global misuse of M2. The analyst highlighted that China, which accounts for 46% of global M2, is the only major economy whose money supply surpassed its post-COVID peak in dollar terms.

“They’re trying to get out of years of debt deflation and they’re doing badly. Their M2 went straight up,” TXMCtrades commented.

Meanwhile, U.S. M2 remains below its 2022 peak. He emphasized that it is growing at its slowest pace since Bitcoin’s inception, except for the 2022-2024 period, suggesting that the U.S. is not experiencing rapid money supply growth, which could affect inflation or other economic trends.

This disparity, according to TXMCtrades, further undermines the credibility of global M2 as an indicator for Bitcoin price movements. He also dismissed the use of “random delay” to adjust global M2 to Bitcoin price fluctuations, a method that some analysts have adopted.

For instance, Raoul Pal proposed a 12-week lag between the global M2 and the Bitcoin price. Colin Talks Crypto recommends a lag of 15.4 weeks, while Mr. Wall Street estimates a lag of 10.7 to 15 weeks. Some extend the M2 correlation to predict altcoin prices, like Solana (SOL).

“SOL has been tracking the global M2 Money Supply (+100 ngày) in the last two hikes. If this continues, SOL will rise sharply within the next 2 weeks,” the Curb analyst posted.

However, the analyst said that the lags are usually arbitrary and do not reflect the true dynamics of money supply or asset prices.

“Money is money, it has no waiting time,” he declared.

The analyst said that such models are often overadjusted according to recent historical data and lack a solid basis for forecasting. Finally, TXMCtrades calls for more seriousness in financial analysis, urging analysts to “stop spreading deceptive analyses” and adopt more mathematically grounded approaches to understanding cryptocurrency price dynamics.

Disclaimer:*** The article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions

Mr. Teacher