Many people overlook M2, but for professional traders, this is the most daunting macro indicator when it changes direction.
📌 What is M2?
Simply put, it's the total cash + savings deposits + readily withdrawable funds. This measures the 'breathability' of money flow in the economy.
📈 When M2 increases:
• Abundant liquidity, money seeks high yields.
• Crypto and stocks surge due to 'cheap money' → widespread FOMO.
• Low interest rates → everyone can borrow, pushing asset prices up.
📉 When M2 decreases:
• Money flow contracts, margin calls, the market panics.
• Investors sell off risky assets → crypto, tech stocks are hit first.
• Interest rates rise → money flows into banks, bonds.
🧠 With crypto:
• M2 increases = bull run begins.
• M2 decreases + high interest rates = altcoin season meets an early demise.
📊 Conclusion traders need to remember:
• Don't just look at the chart, consider the monetary fundamentals.
• M2 is the 'bloodline' of the market. When blood flow weakens → all assets experience a drop in pressure.
