Bitcoin: Global Liquidity (M2) vs Bitcoin Price
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Indicator Overview
The Global Liquidity chart tracks growth in global money supply from major central banks versus Bitcoin price.
What is Global Liquidity
Global Liquidity is a term used to determine how much money is available in the global economy. It is a term used when referring to the M2 money supply.
M2 money supply is a measure of the total amount of currency and near money in a country’s economy. It includes cash, checking deposits, savings deposits, money market accounts, retail mutual funds, and time deposits of less than $100,000.
How is Global M2 Calculated
At Look Into Bitcoin, we also incorporate the Federal Reserve's Liabilities with other federal reserve banks and Overnight Reverse Repurchase Agreements. This provides a more effective measurement of the financial money supply versus only tracking M2 money supply.
Major Central Banks tracked for Global M2:
- USA - Federal Reserve
- China - People’s Bank of China
- EU - European Central Bank
- UK - Bank of England
- Japan - Bank of Japan
- Canada - Bank of Canada
- Russia - Bank of Russia
- Australia - Reserve Bank of Australia
What Does it Mean When Global Liquidity or Global M2 is Increasing
It means that major Central Banks are making more money available in the global financial system. This is achieved through either lowering interest rates or implementing quantitative easing. Quantitative easing involves buying up government bonds and other securities to increase the money supply.
You can track increases and decreases in Global Liquidity using the chart on this page.
Why is Global Liquidity Important for Bitcoin
More money in the global system can encourage spending on perceived ‘risk assets' such as Bitcoin. It is therefore extremely valuable for strategic investors to monitor changes in global liquidity over time in relation to Bitcoin price.
Historically, Bitcoin bull markets have coincided with the rapid expansion of global liquidity.
Some people view Bitcoin as a potential alternative to the existing Central Banking system. This is because Bitcoin has a predetermined monetary schedule. This is another reason people choose to monitor the price of Bitcoin alongside fluctuating global liquidity.
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