Bitcoin as a Market Health Indicator
Cryptocurrency enthusiast and radio host Mark Moss believes that Bitcoin is the ultimate indicator for gauging overall market health. Moss challenges the traditional focus on earnings and economic data, emphasizing the importance of following liquidity instead.
Follow The Money, M2 Supply, And Bitcoin Positively Correlate
Moss highlights billionaire investor Stanley Druckenmiller’s successful track record of averaging 30% annual returns by following liquidity. Druckenmiller has stated that liquidity, not earnings or other fundamental indicators, drives the market.
Moss further supports this approach by sharing a chart demonstrating the relationship between the M2 money supply in the United States and Bitcoin prices since 2013. He argues that Bitcoin’s close positive correlation with the M2 supply makes it a reliable gauge for tracking overall market health.
The M2 money supply has risen approximately 38% in the past four years, coinciding with Bitcoin’s rally. Since March 2020, when the US Federal Reserve began intervening due to COVID-19, BTC has surged nearly 10X. The stock market has also grown sharply driven by free money.
Eyes On The Federal Reserve, Which Way BTC?
Moss suggests that monitoring Bitcoin’s price action can provide valuable insights into market sentiment towards risk and liquidity. BTC tends to rise when there is optimism and increasing liquidity or expectations of its recovery.
Currently, BTC is trading above $46,500, and market participants are optimistic about further gains in the coming weeks.
Hot Take: Bitcoin as an Indicator of Market Health
Mark Moss argues that Bitcoin’s performance is a reliable indicator of overall market health. By following liquidity instead of focusing solely on earnings or economic data, investors can gain valuable insights into market sentiment and liquidity conditions. The positive correlation between Bitcoin’s price and the M2 money supply in the US further supports this viewpoint. As Bitcoin continues to rally alongside increasing liquidity, it serves as an important gauge for tracking market trends. Therefore, monitoring Bitcoin’s price action can provide investors with valuable information about risk and market conditions.
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