Adjusting asset prices for U.S. M2 money supply growth reveals a weaker picture for both bitcoin and the S&P 500 than their nominal levels suggest. Bitcoin's price-to-M2 ratio has formed a head-and-shoulders pattern, often a bearish signal, suggesting its ability to outpace money supply growth may be fading. Meanwhile, on a money-supply-adjusted basis, the S&P 500 has only recently reclaimed its dot-com-era peak, indicating that each new dollar added to the system has yielded smaller marginal valuation gains. This matters because bitcoin is often seen as a leading indicator for risk appetite. If bitcoin is losing its structural edge against dollar liquidity, it could be an early warning for broader risk assets. However, S&P 500 earnings today are stronger than during the dot-com bubble, so a direct comparison may be limited.

Key facts

• Bitcoin's price-to-M2 ratio shows a bearish head-and-shoulders pattern.
• S&P 500 money-supply-adjusted valuation only recently returned to dot-com peak.
• Bitcoin's ability to outpace money supply growth appears to be diminishing.
• Bitcoin may act as a leading indicator for broader risk appetite.
• S&P 500 earnings today are stronger than during the dot-com bubble.

KeyAudit data perspective