The U.S. money supply has just reached a new milestone, with the M2 money supply total climbing to a historic high.
According to newly released data, the U.S. M2 money supply (a key metric reflecting cash, checking accounts, savings deposits, and money market funds) reached a record $21.94 trillion at the end of May. Compared to the same period last year, this figure represents a 4.5% increase.
This marks the 19th consecutive month of M2 growth, surpassing the previous peak of $21.86 trillion set in March 2022.
Notably, even after adjusting for inflation, M2 still grew by 2.1% year-over-year—the highest real increase in over two years. Since 2020, the total U.S. money supply has expanded by nearly $7 trillion, a 45% surge.
This liquidity boom coincides with a sharp weakening of the U.S. dollar. The Dollar Index fell 10.8% in the first half of the year, marking its worst six-month performance since the collapse of the Bretton Woods system in 1973 and the poorest showing since the 2009 financial crisis.
The dollar's persistent decline reflects diminishing purchasing power and exposes structural vulnerabilities in the U.S. economy.
A Tailwind for Bitcoin
For cryptocurrency markets—especially Bitcoin—this abundant liquidity environment could serve as a catalyst for new capital inflows.
The sustained rise in M2 (which measures money supply including cash, deposits, and savings) typically signals bullish conditions for Bitcoin. It indicates excess liquidity in the financial system, encouraging investors to seek higher-yielding opportunities like Bitcoin rather than low-return traditional assets.
While it remains uncertain whether this trend will kickstart a new Bitcoin bull cycle, many investors believe current conditions are creating fertile ground for the cryptocurrency's recovery.
Before entering its recent consolidation phase, Bitcoin's price showed signs of slowing despite rising M2—making this correlation harder to predict. If historical patterns repeat, Bitcoin could become an attractive destination for capital seeking returns outside traditional finance.
ADP Jobs Shock and Powell Probe
The ADP employment report (often called the "mini non-farm payrolls") projected 99,000 new jobs in June but unexpectedly reported a decline of 33,000—the first negative reading in two years, signaling rapid deterioration in the U.S. job market. Stocks initially dipped but quickly rebounded, with the S&P 500 and Nasdaq hitting new highs.
Bitcoin had already recovered to $108,000 earlier in the day after positive sentiment around political developments. By midnight, it surged past $109,000 due to both the weak ADP data (reinforcing expectations for early rate cuts) and reports that the FHFA requested a Congressional investigation into Fed Chair Powell.
Powell's refusal to cut rates has drawn criticism for perceived political bias. If investigated, he could face suspension or resignation, potentially paving the way for a rate-cut-friendly successor—a scenario markets interpreted as bullish.
With the ADP miss alone justifying potential Fed easing, tonight's non-farm payrolls and unemployment data could cement September rate-cut expectations. Barring negative developments in next week's tariff negotiations or elsewhere, equities and crypto may maintain this upward momentum until rate cuts materialize.
FAQ
How does M2 growth affect Bitcoin?
M2 expansion signals excess liquidity, often driving investors toward alternative assets like Bitcoin as traditional yields decline. Historically, rising money supply correlates with Bitcoin price appreciation.
Why is a weak dollar bullish for crypto?
A declining dollar reduces purchasing power, making hard-capped assets like Bitcoin more attractive as hedges against inflation and currency devaluation.
What’s the significance of the jobs data?
Weak employment figures pressure the Fed to cut rates sooner. Lower interest rates typically weaken the dollar and boost risk assets like crypto.