A bunch 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 only 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 seek 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 seek out predictive indicators. In accordance with some traders, the worldwide inventory of cash, as measured by a 100-day offset M2, is a robust sign for the worth of BTC.
This specific comparability has turn into common on X.
Nevertheless, Protos has illustrated how these knowledge inputs may 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 full 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 appropriate, 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 typically endure from cognitive biases. As a result of they virtually at all times 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 typically neglect about knowledge dredging.
Also referred to as knowledge snooping or the backtesting fallacy, looking out a number of inputs and highlighting solely probably 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 tell apart correlation from causation.
Certainly, any backtesting software program like Bloomberg or TradingView can immediately present countless 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 enhance. Charts of those knowledge development in good lockstep, but they’re utterly unrelated and share no causative relationship.
Statistical significance, not simply overlapping strains
Furthermore, M2 is a poor measure of fiat liquidity — which is much extra correlated with the power of traders to allocate fiat to buy BTC.
Though the amount of cash rising would seemingly correlate with the amount of fiat accessible to buy BTC, that buying energy is definitely higher measured by liquidity, not M2.
As well as, skeptics notice that though knowledge would possibly correlate over a given time interval, what issues is statistically vital correlation.
Particularly, p-values measure the probability {that a} relationship between two variables is unlikely to come up by probability. Sadly, BTC p-values are far larger for measures of fiat liquidity than M2.
The ‘lagging M2 chart is all you need’ bitcoin bros are going to be actually unhappy this yr
— Joe Carlasare (@JoeCarlasare) June 23, 2025
Lastly, technical analysts typically neglect about autocorrelation. M2 is solely the amount of cash, which clearly correlates with the denominator of all costs. In different phrases, M2 autocorrelates with the worth of every part.
Briefly, M2 is solely one amongst numerous knowledge inputs that may mimic the chart of BTC. Nevertheless, the correlation breaks down on varied time frames, and it’s unlikely that the connection is causative quite than merely correlative.
