Money-supply-adjusted valuations of Bitcoin and the S&P 500 show contrasting moves: Bitcoin has nearly halved to about $66,000 from a $126,000 peak in October of last year, while the S&P 500 hovers near a record high around 7,511 points. The BTC/M2 ratio climbed from 2023 through 2025 and appears to have formed a head-and-shoulders pattern typically read as a bearish signal. It has taken about a quarter-century of money-supply expansion for the S&P 500’s monetary-adjusted valuation to return to the level seen at the height of the dot‑com bubble.
The Federal Reserve’s M2 money supply is its estimate of liquid assets, including cash on hand, money deposited in checking and savings accounts, and other short-term saving vehicles such as money market funds and certificates of deposit. Bitcoin has at times been viewed as a leading indicator for broader risk appetite, while the S&P 500’s money-supply-adjusted valuation looks different from its nominal price. It has taken about a quarter-century of money-supply expansion for the S&P 500’s monetary-adjusted valuation to return to the level seen at the height of the dot-com bubble. Every new dollar added to the system has had to work harder for a relatively smaller marginal gain in valuation.
The BTC/M2 ratio climbed from 2023 through 2025 and appears to have formed a head-and-shoulders pattern, which is typically read as a bearish signal. Bitcoin’s price has nearly halved to about $66,000 from a $126,000 peak in October of last year. If the head-and-shoulders pattern holds, Bitcoin’s edge over money supply growth could be fading, suggesting diminishing returns for now. Those dynamics contrast with the S&P 500, which currently hovers near a record high around 7,511 points even as its money-supply-adjusted valuation reflects long-term money-supply expansion.
The history of the S&P 500’s valuation when adjusted for money supply reveals a significant journey. It took about 25 years for the S&P 500’s monetary-adjusted valuation to climb back to the level last seen at the peak of the dot-com bubble. This extended period of money-supply expansion contrasts sharply with the S&P 500’s current nominal price, which has reached a record high of approximately 7,511 points, far exceeding its 2000 peak of about 1,500 points.
However, every new dollar added to the system over these years has resulted in progressively smaller marginal gains in valuation, highlighting a decreasing efficiency of liquidity in boosting market valuations. This difference between nominal and money-supply-adjusted valuations underscores the long-term impact of liquidity and money supply dynamics on asset price levels.
A cautious, analytical view of money-supply-adjusted valuations of Bitcoin and the S&P 500 notes that the assets convey different implications for risk appetite and valuation trends when measured against U.S. M2. Bitcoin’s BTC/M2 head-and-shoulders pattern suggests its edge over money-supply growth could be fading, while the S&P 500’s monetary-adjusted valuation diverges from its nominal price and shows diminishing marginal gains per added dollar of liquidity.
