Published 04 Mar, 2024
As of this writing, bitcoin (BTC) is more than $66,000 a coin. If fact, it shows little evidence of slowing such price action (spurred-on by retail buyers FOMOing via newly-allowed ETFs).
The world's first cryptocurrency is flirting with its all-time high (ATH), the psychologically significant November of 2021 number, $69,044.77. Bitcoin only has about 3.5% to go ... or does it?
Inflation Over 2+ Years
Enter the bugaboo of fiat, inflation.
And bitcoin, of course, is priced in US dollars (USD), so it only makes sense to take into account certain USD monetary realities.
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Truflation found inflation since early November of 2021 totals just under 11%, 10.98% to be exact. This means the inflation-adjusted loss of USD purchasing power forces more greenbacks into chasing fewer BTC.
The sober truth, then, is bitcoin has another $10,000 to climb in order to reach its real ATH of $76,623.74.
Root Cause and a Main Bitcoin Raison D'Etre
By December of 2021, the US M2 money supply hit 21.55T.
The amount of dollars created and put into circulation increased from $15347 billion in early 2020, to $21269 billion in late 2021. That's up 38.5% in a little under 2 years. Something like 40% of all money ever printed was placed into existence in a mere matter of months ... with little more than legislative finger snaps.
For sure, 2021 witnessed unprecedented growth in the US M2 money supply, but it's important to note that flood of filthy lucre was fueled by expansive fiscal and monetary policies aimed at mitigating economic fallout from the COVID-19 pandemic.
Understanding M2 Money Supply Growth
The M2 money supply encompasses currency, checking deposits, savings deposits, money market securities, and other liquid assets. It serves as a crucial indicator of the overall liquidity and financial health of an economy. Throughout 2021, the M2 money supply in the US experienced extraordinary expansion, driven by various factors.
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Impact on Inflation
M2 money supply growth raised concerns about its potential inflationary impact on the economy. Increased liquidity can stimulate spending and aggregate demand, leading to upward pressure on prices across various sectors.
The surge in M2 money supply growth in 2021, driven by fiscal stimulus measures, accommodative monetary policies, and changes in banking behavior, had significant implications for inflation in the United States and, it appears, for conventionally valuing bitcoin.
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