Adjustments reveal troubling patterns for risk assets
Recent analysis indicates that both Bitcoin and the S&P 500, when adjusted for the U.S. M2 money supply, exhibit less favorable trends than their nominal values suggest. As of mid-June 2026, Bitcoin has seen a significant decline of nearly 50%, dropping from a peak of $126,000 to $66,000, while the S&P 500 remains near historical highs.
However, adjusting these figures for the M2 money supply—a measure that includes cash, checking and savings deposits, and other liquid assets—provides a more nuanced view of market valuations. Analysts have noted that Bitcoin's price relative to the M2 money supply indicates a potential bearish trend, as the BTC/M2 ratio appears to be forming a head-and-shoulders pattern, often seen as a sign of weakening market conditions.
Market Dynamics and Valuations
The S&P 500 index, which recently hit a nominal high of 7,511 points, only just matched its 2000 peak when adjusted for two decades of M2 growth. This suggests that despite the soaring nominal index, the underlying value has not kept pace with the increase in money supply. It has taken 25 years of M2 growth for the index to return to its dot-com bubble peak, indicating that new dollar injections into the economy are yielding diminishing returns in asset valuation.
