A gaggle of technical analysts has satisfied themselves that the worth of bitcoin (BTC) strongly correlates with M2 cash, but their compelling charts decorrelate on even the best zoom modification.
In fact, the narrative of BTC — set in stone since Satoshi Nakamoto’s genesis block inscription about financial institution bailouts — is that BTC ought to displace fiat.
Motivated to search out knowledge supporting this narrative, technicians found M2, overlaid it atop BTC, and printed screenshots to social media.
Technical analysts chart costs and buying and selling volumes in an try to search out predictive indicators. In accordance with some buyers, the worldwide inventory of cash, as measured by a 100-day offset M2, is a powerful sign for the worth of BTC.
This explicit comparability has turn out to be fashionable on X.
Nonetheless, Protos has illustrated how these knowledge inputs might be decoupled just by enhancing the zoom setting from 2021 to current (left) to 2019 to current (proper).
2021 – current
2019 – current
Click on to enlarge.
M2 is the entire amount of cash in money, checking and financial savings accounts, vacationers checks, small time deposits, and cash market funds the world over’s main economies.
M stands for “money” and the quantity 2 signifies the breadth of the definition. M2 is the second, extra inclusive definition after M1 which excludes financial savings accounts and cash market funds.
Within the first chart on the left, the inexperienced M2 line seems to easily rise and fall with the orange BTC line. On the second chart to the correct, M2 soars two years earlier than BTC rallies to catch up, even reaching a brand new excessive in November 2022 whereas BTC crashes into the chapter of FTX.
BTC versus M2: Correlation versus causation
Sadly, technical analysts usually undergo from cognitive biases. As a result of they virtually all the time analyze knowledge visually, they’re vulnerable to curve-fitting.
People are naturally biased to see patterns, even amid arbitrary randomness, and becoming the curves of charts to rise and fall collectively in sure timeframes is a textbook fallacy.
Furthermore, technical analysts usually overlook about knowledge dredging.
Often known as knowledge snooping or the backtesting fallacy, looking a number of inputs and highlighting solely essentially the most extremely correlated knowledge — even when that correlation may very well be as spurious because the hundreds of different, disregarded knowledge — is an apparent failure to differentiate correlation from causation.
Certainly, any backtesting software program like Bloomberg or TradingView can immediately present limitless knowledge inputs that amazingly correlate with unrelated inputs.
A basic instance of two issues correlating with none causative relationship is ice cream gross sales and drowning.
Throughout summer time months, each ice cream gross sales and drowning incidents improve. Charts of those knowledge development in excellent lockstep, but they’re fully unrelated and share no causative relationship.
Statistical significance, not simply overlapping strains
Furthermore, M2 is a poor measure of fiat liquidity — which is way extra correlated with the flexibility of buyers to allocate fiat to buy BTC.
Though the amount of cash growing would seemingly correlate with the amount of fiat out there to buy BTC, that buying energy is definitely higher measured by liquidity, not M2.
As well as, skeptics notice that though knowledge may correlate over a given time interval, what issues is statistically important correlation.
Particularly, p-values measure the chance {that a} relationship between two variables is unlikely to come up by likelihood. Sadly, BTC p-values are far greater for measures of fiat liquidity than M2.
The ‘lagging M2 chart is all you need’ bitcoin bros are going to be actually unhappy this 12 months
— Joe Carlasare (@JoeCarlasare) June 23, 2025
Lastly, technical analysts usually overlook about autocorrelation. M2 is just the amount of cash, which clearly correlates with the denominator of all costs. In different phrases, M2 autocorrelates with the worth of the whole lot.
In brief, M2 is just one amongst numerous knowledge inputs that may mimic the chart of BTC. Nonetheless, the correlation breaks down on varied time frames, and it’s unlikely that the connection is causative slightly than merely correlative.
