Bitcoin Adjusted for Money Supply & Why a Floor Might Be In

Bitcoin-Adjusted-for-Money-Supply-Why-a-Floor-Might-Be-In

One of the notable economic events in recent years was the sheer volume of money printed by the US. Injecting so much additional cash into a system will skew data. 

If we adjust Bitcoin for money supply using this formula BTCUSD/FRED:M2SL*21 (reference FRED M2SL for money supply), you find a perfect correlation between this cycle and 2019:

  -2020 lows were a retest of the 2019 low. 
  -2022 lows are a retest of the 2019 high.

Some would argue the M2 adjusted Bitcoin chart is a lot cleaner of a chart because it removes some of the noise produced by the macro environment.

Using this chart, it suggests the floor was in between $15k and $17k.  

That actually aligns with some historical Bitcoin patterns. The past two bear markets developed a floor around 300 to 330 days after momentum/RSI reflects peak oversold conditions. And if the Fed is now signaling a slowing of rate hikes into 2023, it may also align with these data points, signaling a floor is in.