If inflation is increased, there are more trimming chances in interest rates.
The surplus of money supply can be transferred to assets considered “risk”.
The M2 monetary offer of the United States remains to increase, which feeds the bullish expectations for financial assets such as Bitcoin (BTC) and cryptocurrencies.
According to the latest monthly report published on January 28, 2025, The M2 money supply of economic power rose to 21.5 billion dollars (USD) in December. In this way, it is approaching the historical maximum of USD 21.7 billion recorded almost two years ago, in 2022.
With this result, this metric continues the ascending trend that has been for a year, something that has been positively impacting markets.
The M2 money supply is an economic indicator that includes several components of the monetary mass of a country. The M2 measure expands the definition of M1, regarding cash and bank accounts, also integrating forms of money that are not as liquid, as financial instruments. This metric demonstrates the general liquidity in the economy of a country that can circulate for expenses and investments.
The increase in the M2 monetary supply of the United States reflects greater liquidity in the economy that can enter the markets. Therefore, its greatest surplus coincides with the greatest demand for Bitcoin that has brought its price to new historical maximums.
Facing the future, The growth of the monetary mass M2 is a bullish indicator for the assets considered of “risk” due to its high volatility as Bitcoin. It is for this reason that the panorama that is brewing is a good sign for markets, especially if the trend it maintains continues.
The Federal Reserve (FED), the Central Bank of the United States, has cut interest rates in the last three decisions of 2024, which has contributed to the greatest liquidity. Although, the agency, as pointed out last month, plans to reduce the rhythm of reductions and establish only two this year.
The United States inflation could be fueled, allowing rate cuts
While the hardening of the Fed is an attenuation of the stimulus for the markets, the lowest levels of interest mean lower yields in traditional fixed income instruments. Consequently, This can continue feeding the attractiveness of alternative assets such as Bitcoin for investorswhile the M2 continues to climb.
However, it is key to consider that the increase in the amount of money in circulation can increase the demand for goods and services, pressing prices. That is to say, As a result inflation could growsomething that generates more possibilities that the Fed cuts the rates.
This context takes place while, as Cryptoics reported, different bydist signals for Bitcoin continue for this year, according to historical cyclic data, the greatest institutional adoption and plans in favor of the market of the new president of the United States, Donald Trump.
