M2 Money Supply Nears All-Time Peak, signaling Positive Outlook for Crypto, According to Van Straten.

U.S. M2 Money Supply Reaches $21.5 Trillion in December, Fueling Bullish Sentiment for Risk Assets

In December, the U.S. M2 money supply surged to $21.5 trillion, coming close to its record high, signaling continued liquidity growth in the economy.

The M2 money supply measures the total money in circulation, including cash, checking deposits, and less liquid assets like savings accounts. Meanwhile, the Consumer Price Index (CPI) tracks the average change in the price of goods and services, reflecting inflationary trends.

The rise in the M2 money supply is seen as a positive indicator for risk assets, as it suggests more liquidity is flowing into the economy. This additional capital typically funnels into riskier assets first, providing a boost to their value.

Since January 2024, the M2 money supply has consistently reached new monthly highs. Despite the Federal Reserve’s efforts to combat inflation by tightening monetary policy through higher interest rates and quantitative tightening, the M2 money supply has continued to expand. This ongoing increase in money supply could provide continued support for risk assets moving forward.