When adjusted for U.S. M2 money supply growth, both bitcoin and the S&P 500 reveal concerning trends that differ significantly from their nominal price levels. According to reports from CoinDesk, the S&P 500 currently hovers near a record high of 7,511 points, well above its 2000 peak of around 1,500 points in nominal terms. However, when adjusted for two decades of M2 growth, the index has only recently reclaimed that 2000-era high, indicating that every new dollar added to the system has had to work harder for a relatively smaller marginal gain in valuation.
The BTC/M2 ratio, bitcoin's price adjusted for money supply growth, is now flashing what technical analysts call a head-and-shoulders pattern, typically read as a bearish signal. As reported by CoinDesk, after a sharp climb from 2023 through 2025, this pattern suggests bitcoin's exponential edge over money supply growth may be fading. Bitcoin has nearly halved to $66,000 since its $126,000 peak in October of last year, with some observers viewing bitcoin as a high-beta barometer for dollar liquidity.
Despite bitcoin's decline and the S&P 500's recent performance, the underlying monetary dynamics suggest a more complex picture than surface-level price movements indicate. According to CoinDesk, the S&P 500's money-supply-adjusted valuation tells a story that looks very different from its nominal price, with corporate earnings today generally considered stronger and more durable compared to 1999-2000. However, the quarter-century of money-supply expansion required to reach previous peaks suggests that current market levels may rest on thinner foundations than they appear. The S&P 500 Index has grown top-heavy, with a small group of mega-cap companies driving much of its returns, creating challenges for traditional diversification strategies.
