Van Straten Highlights M2 Money Supply’s Approach to Record Levels as a Bullish Crypto Signal.

U.S. M2 Money Supply Reaches $21.5 Trillion in December, Boosting Bullish Outlook for Risk Assets

In December, the U.S. M2 money supply grew to $21.5 trillion, nearing its all-time high and signaling a positive outlook for risk-on assets.

The M2 money supply tracks the total amount of money in circulation, including cash, checking accounts, and savings deposits, as well as other near-money assets. In contrast, the Consumer Price Index (CPI) gauges inflation by measuring the average price changes of goods and services.

An increase in the M2 money supply is often seen as a bullish indicator for risk assets, as it suggests more liquidity is being injected into the economy. This excess liquidity typically finds its way into riskier investments first, driving their value higher.

The M2 money supply has reached new record levels each month since January 2024. Despite the Federal Reserve’s ongoing efforts to reduce inflation through tighter monetary policy, including higher interest rates and quantitative tightening, the M2 money supply continues to grow. This persistent expansion of liquidity is expected to continue supporting risk assets in the near term.