This chart tracks the US M1 money supply (currency in circulation plus demand deposits and other highly liquid accounts) against Bitcoin's price. M1 represents the most liquid components of the money supply and is a key indicator of monetary expansion that may impact Bitcoin's value proposition as a scarce asset.
Interpretation
The most dramatic feature on this chart is the unprecedented 2020-2021 M1 expansion, when the money supply increased dramatically due to pandemic stimulus and a change in how M1 was calculated (including savings accounts). This extraordinary expansion preceded Bitcoin's dramatic rise from under $10,000 to over $60,000. The subsequent slowdown in M1 growth in 2022 coincided with Bitcoin's bear market, suggesting a relationship between money supply growth rates and Bitcoin performance.
Key Insights
- The extraordinary surge in M1 during 2020-2021 coincided with Bitcoin's strongest bull market to date
- Bitcoin's narrative as a hedge against monetary expansion gained mainstream attention after the 2020 COVID stimulus
- The 'Money printer go brr' meme of 2020 captured the zeitgeist of this period when Bitcoin rallied alongside expanding money supply
- Previous periods of steady M1 growth (2016-2019) also saw Bitcoin appreciation, but at a more measured pace