Forget the price charts. Here's how bitcoin and S&P 500 look like when adjusted for the money printer

If you're only looking at the dollar price of your portfolio, you may be missing part of the picture, which is significantly shaped by money supply growth.

To the casual observer, the markets look like business as usual. While bitcoin has nearly halved to $66,000 since its $126,000 peak in October of last year, the decline could be dismissed as just another brutal, quadrennial crypto bear market. Meanwhile, the S&P 500 continues to hover near record highs.

But beneath the surface, a more interesting signal emerges when both prices are adjusted for the U.S. M2 money supply. M2 is the Federal Reserve's 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.

Monetary exhaustion?

Some observers see bitcoin as a high-beta barometer for dollar liquidity, and the BTC/M2 ratio, bitcoin's price adjusted for money supply growth, is now flashing a warning. The ratio, after a sharp climb from 2023 through 2025, appears to have formed what technical analysts call a head-and-shoulders pattern, typically read as a bearish signal.

If the pattern holds, it would suggest bitcoin's exponential edge over money supply growth — the dynamic that let it outrun debasement so convincingly in prior cycles — is fading. Bitcoin's ability to outpace the flood of new dollars may be approaching diminishing returns, at least for now.

That matters beyond crypto. Bitcoin has at times been viewed as a leading indicator for broader risk appetite, and the S&P 500's own money-supply-adjusted valuation tells a story that looks very different from its nominal price.

The index currently hovers near a record high of 7,511 points, well above its 2000 peak of around 1,500 points in nominal terms. But adjusted for two decades of M2 growth, the S&P 500 has only recently reclaimed that 2000-era high. That doesn't necessarily mean equities are as overextended as they were at the height of the dot-com bubble, as corporate earnings today are generally considered stronger and more durable compared to 1999-2000.

But on this specific money-supply-adjusted basis, it has taken a quarter-century of money-supply expansion just to get the index's monetary-adjusted valuation back to where it stood at the height of the dot-com bubble. In other words, every new dollar added to the system has had to work harder for a relatively smaller marginal gain in valuation.

The takeaway

Bitcoin has at times moved ahead of broader macro turns. If its monetary valuation is genuinely losing ground to M2 growth, it could be an early warning that the S&P 500's nominal gains rest on a thinner foundation than they appear.

Whether that translates into actual weakness for equities remains to be seen, but when the most liquidity-sensitive asset in the room shows signs of losing its structural battle against the dollar supply, it's at least worth a moment of caution for the rest of the risk-on world.