Bitcoin's role as a liquidity indicator in the global market

Crypto assets analyst Willy Woo emphasized the speculative nature of the market, pointing out that its movements do not directly reflect the expansion of the global M2 money supply. Instead, the market often anticipates expected liquidity, with peaks in risk assets like the S&P 500 index and Bitcoin typically occurring before M2 reaches its peak. Woo believes that Bitcoin can serve as a mechanism for perceiving changes in liquidity. Woo also pointed out the flaws in the M2 metric. The M2 metric measures the total money supply in an economy, which includes high liquidity assets like cash and checking deposits (M1), as well as lower liquidity savings accounts, time deposits, and deposits at non-bank financial institutions. Although M2 is denominated in US dollars, only 17% of it is in dollars, with the remainder in foreign currencies. Therefore, M2 reflects the strength of the dollar rather than the total money supply. Woo believes that the US dollar index (DXY), which measures the strength of the dollar, is more effective in assessing its correlation with Bitcoin.