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BTC Valuation Adjusted for Money Supply & Dollar StrengthHey fellow traders, So my custom ticker formula is BTCUSD*DXY/M2. So this boils down to: Multiplying BTCUSD by Dollar Strength Index Dividing by M2 (The total number of dollars in circulation) Let's examine WHY we are doing this. When DXY is falling, the US Dollar is losing value, which prompts commodities or alternative investments like Bitcoin, to flourish. When DXY is rising, investors are staying away from speculative assets and are comfortable with their dollars, which promotes investments like Bitcoin to take a beating. This is to say that Bitcoin and DXY has an inverse relationship - i.e. when one is falling, the other is rising and vice versa. If we just dust off our old middle school math notebooks, we can remember that if A and B has an inverse relationship, then A*B equals a constant k, i.e. A * B = K. This constant K essentially tells us how much we can expect A to rise when B takes a beating. By plotting BTCUSD*DXY we would have plotted how this constant k is changing over time. This constant k gives us a metric of how strong BTC is. Greater the constant, greater the possible increase in BTC value in the next DXY bear cycle. Okay, we now understand why we multiply by DXY; now we have to answer why we divide by M2. M2 as a measurement of the money supply is a critical factor in the forecasting of issues like inflation (Investopedia). It is a metric of how many dollars are in circulation. Okay then, why do we divide by it. Well, let's think about the relationship between money supply and BTC. When more US dollars are printed, the US Dollar becomes less valuable, so a 20K BTC valuation today might be worth less than the 20K BTC valuation 3 years ago. Essentially, we are adjusting for inflation. When more dollars are printed, then per inflation, everything would be more expensive, including commodities like gold or alternative investments like Bitcoin. So as the number of dollars in circulation increase (radically - like this year), so would the price of BTC. Bitcoin and Money Supply has a proportional relationship - i.e. when one is falling, the other is falling and vice versa. Looking at our old middle school math notebooks again, if A and B has a proportional relationship, then A / B equals a constant k, i,e, A / B = k. This constant K again tells us the valuation of BTC when adjusted for inflation. So by doing both operations, we can adjust the valuation of BTC per inflation and USDollar Strength. The findings are very interesting, to say the least.
BITSTAMP:BTCUSD
by SBLineker
3
S&P 500: The Big Picture IIDividing SPX by the money supply (M2) removes distortions caused by changes in the supply of money (dollars). (1) Now, suddenly the skyrocketing SPX surge following the Covid crater isn't so insane, in fact, it has yet to recover to pre-Covid levels! Dividing by M2 arguably gives a more realistic view of equities, revealing the % of money out there that people are willing to invest in equities. That's a meaningful measure of how much society values such investment. By SPX/M2, the SPX has not overshot its post-Great Recession channel and further upward movement appears plausible within that time-tested channel. This is in contrast to the same big-picture analysis I last posted. (2) I'm not sure which is more plausible, but I'm a bit enchanted by /M2 and so am inclined to suspect this might be the better predictive model. SPX/M2 also seems to clarify a four-year-wave cycle that corresponds conspicuously to US Presidential terms. In this model I propose a continuity of that pattern. All of course highly speculative, but with *apparent* plausibility. (1) fred.stlouisfed.org (2)
TVC:SPXLong
by iGoddard
2
BTC price adjusted for money supply did't even hit its ATH yet!I took a closer look at the difference between the BLX/M1 chart and the standard BLX one. I specifically looked at the times the price of BTC definitively crossed its previous ath. The difference between those charts in previous bull runs is minimal. In terms of time difference its 7d and 28d respectively and an about 30% to 40% difference. BUT this time around we are actually still not at the actual ath (meaning in the M1 adjusted chart) while the classic BTC/USD price is way past its all time high. More than 300% of the USD gains are kinda fake. We would need to hit around 100k $ to have a true ath. Previously I estimated the BTC price to top out at between 200k-280k, but if you take all that into account I could see BTC go to 350k$ (even when they stopped printing fiat today which they aren't). Let me know what you think! :)
BNC:BLXLong
by pbrunsteiner
2
Housing Market Rocket Ride to Continue? M2 Money Printer BrrringFMAC HPI Housing price index is interesting to look at versus the money supply. Both are always increasing and fairly predictable since 2012. The HPI tends to follow this ebb and flow moving up all the time, until this year where we haven't seen it's typical plateau. When you check the money supply trend, M2, we can see that if we follow the trend going back to like 2012, that since January 2020 we should have seen only around a 3% max increase in the money supply, and maybe actually flat if we were at the bottom channel. Instead we've seen 18% more increase than the 3% we anticipated, for a total of around 21% increase where we would have expected a maximum of only 3%. Now looking at the HPI we can see that very typically it ebbs and flows in these 4-6% up cycles, lets call them 5%. This year we haven't see that plateau and have gone straight up about 10%, only double. The question is how correlated are these two, are we set to see another 35% straight increase in the HPI over the coming months and years??? 21% increase / 3% anticipated increase in M2 = 7 times anticipated 10% increase / 5% anticipated increase in HPI = 2 times anticipated 7 / 2 = 3.5 times HPI lag versus the money supply Will we see that 3.5 times lag play out as another 30% straight increase in the HPI? Many other factors such as supply and demand play factors in the housing market, but this is an interesting one to watch.
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by TraderCaps
Why BITCOIN is rising (USD + Money Supply cross study).Last week Bitcoin broke above its September 19 High, effectively crossing the short-term Resistance, reversing the sentiment to bullish. Why this happened? Well talks of a new stimulus package have been renewed and along that the U.S. Dollar (DXY) has started to lose its value in expectation that new money will be inserted into the system. What does that have to do with BTC? Simple. As you see on the chart (marked with green), in the post COVID outbreak era, every time the USD initially rises and then starts to fall while the M1 (money supply representing the stimulus on this study) starts to fall but news have it that the printing machine will stay on to support the economic damage sustained by the COVID outbreak, BTC starts a rally (one time very aggressive, the other two not so much). What does this show? That as long as new stimulus will be provided into the market (M1 rising), depreciating the USD already in circulation (USD falling), this fresh capital is used into risky investments such as Bitcoin, causing its price to rise. What's surprising on this find, is that those readings seem to be systemic, as the appear on an average of 40 days. Can this be used to identify medium-term BTC accumulation levels? Seems like it. What do think? Is the cheap dollar and renewed stimulus deal talks the reason for this rise on Bitcoin? Feel free to share your work and let me know in the comments section! Please like, subscribe and share your ideas and charts with the community! -------------------------------------------------------------------------------------------------------- !! Donations via TradingView coins also help me a great deal at posting more free trading content and signals here !! 🎉 👍 Shout-out to TradingShot's 💰 top TradingView Coin donor 💰 this week ==> AxelShadah -------------------------------------------------------------------------------------------------------- P.S. This is a continuation of a cross asset study that I published 2 weeks ago (September 27) but was deleted. I am posting it again below for future reference reasons:
BITSTAMP:BTCUSD
by TradingShot
21
The myth of hyperinflation series #5- Velocity of moneyEven if the purchasing power is rising, without the increase of velocity of money, there will be no inflation and sustained economic growth. Circulation/velocity of money measures the interval between money transactions, decline means less transaction is taking place and the interval between money transactions is getting longer. According to the July 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices, senior loan officers have tightened their standards and terms on commercial and industrial (C&I) loans to firms of all sizes. Furthermore, banks reported weaker demand for C&I (commercial & real estate) loans from firms of all sizes and weaker demand across all three major commercial real estate (CRE) loan categories- construction and land development loans, nonfarm/nonresidential loans, and multifamily loan over the second quarter of 2020. Next, we will look at demand and consumption.
FRED:WM2NSEducation
by Libratus
2
The velocity of money is plunging so let's make some coin off itHardly surprising though, this has taken place whenever GDP contracts & unemployment increases as it certainly will this year. I think one would suspect that this could lead to risk of deflationary effects - which I know sounds odd when one thinks and sees first hand the rampant money printing and radical expansion of money supply, and inflation increasing. I am still heavily biased towards inflation arising over the next few years, with rates eventually rising to combat inflation - but I do want to be on the lookout for any hints as swiftly as possible that my ideology may be wrong. I suspect this drop within the velocity of money is especially pronounced in hospitality industries, restaurants, hotels, aerospace, airlines, tourist destinations - where capital is not being exchanged as freely. We also have unemployment up so some individuals simply are being much more wary of purchasing wants, with potential needs still needing to be met on the horizon. I think mfg's as well have had supply issues coupled with demand issues, with inventories only now ramping back up. With the low demand, and low supply this is a sour recipe that creates less opportunities for transactions, again hurting the velocity of money. What does all of this mean? I think one needs to carefully weigh the proper strategies in the event inflation or deflation where to occur. In the event of the dreaded stagflation again, the writing will be more clear if that is to occur, but again we need to plan accordingly and develop strategies for each. A simple strategy I am doing even outside of the fixed income corporate debt/Div yield strategies etc is within actual real estate. If one were to acquire a home in this environment and inflationary affects play out, you essentially get to double dip on the inflationary affects in a favorable manner. the devaluation of the dollar will be an effect of the inflation. What does this mean for your mortgage? The dollar amount of the debt side of the mortgage will decrease in value, relative to the purchasing power of the dollars within the debt. The debt itself gets eroded away from inflation. Very favorable if you have debt. We want equity with debt of course though. And much more equity relative to the volume of debt. The equity of the home will actually be continuing to rise because the value of dollars continuing to loose value will require more dollars to purchase the same amount of equity - meaning the equity increases in terms of dollars. So inflation will result in the loan decreasing in a dollar weighted comparison, while the equity in the home will increase because of the dollar's devaluation. Equity relative to a home is one thing, but this comparison can be made with equities (stocks) as well, but I think the home comparison may be helpful in getting my logic communicated clearly. Again, this does not mean to go wild longing equities - just like you do not want to go wild and start buying junk houses in the middle of Antarctica We need to be tacticians with finesse ***If you have a great strategy please be sure to share it with me.***
FRED:WM2NS
by ZenMode
7
MZM Money Supply and VelocityMZM money supply is M2 Money supply less small-denomination time deposits plus institutional money funds. Recall that M1 = coins and currency in circulation + checkable (demand) deposit + traveler’s checks & Recall that M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits. MZM Money supply is at ATH which generally makes sense. As time goes on more printing will occur. The 'scary' thing about this chart is that MZMV, the velocity of this very broad money supply, is now <1. That means every dollar is used in transaction <1 time per unit time... an all time low!
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by 420snoop
Indexes vs M1 & M2 Money SupplyM1 = coins and currency in circulation + checkable (demand) deposit + traveler’s checks. M2 = M1 + savings deposits + money market funds + certificates of deposit + other time deposits. We are looking at the major US Indexes Dow 30, SPX 500, Nasdaq 100, & Russell 2000 vs each of these types of money supplies As we print more we expect these money supplies to increase, so we can start to see the 'real growth' in terms of how much $ is 'out there' In the more liquid M1 Money supply it looks like we may have bottomed here on the indexes by testing the 'all time' trend line But in the less liquid M2 Money supply we /could/ expect a fall further if things really go south here. We never tested the 'all time' trend line. No /need/ to but if we did it would be within reason. I examine lots of these 'composite' charts as I call them, but let me know your thoughts as well! Manage your own risk Much Love GL HF xoxo snoop
DJ:DJI
by 420snoop
20% Increase in Currency Supply in 4 months!Just making an observation that the total amount of currency in circulation (Physical + Bank Credit) has increased an unprecedented 20% in the last 4 months. I believe, when we are looking at this chart, we are looking at a Credit Bubble. Something that bothers me. Current National Debt is around $24.2T, however, we have $18.4T in total dollars in circulation. So even if you use every dollar in existence to pay off the National Debt, you still have $5.8T USD in debt remaining... how does that get paid off?? Need to dig more into this.
FRED:WM2NS
by PHICAPITALINVESTMENTS
Gold has plenty of room to run relative to money supplyGold approaches all time highs against the dollar (and is already at ATH against pretty much every other currency), and some might say the metal is getting a little overheated. But when compared to the money supply (M2), gold has a lot of room to run in the coming years and the chart looks extremely bullish. I believe the strength in the chart is a reflection of the fundamental macro picture of a totally reckless Fed brrrrr machine combined with no political willpower on either side of the aisle to slow down fiscal spending. With that in mind, it looks like this bull market is just getting started.
OANDA:XAUUSDLong
by ZChartDoc
19
We are in an unprecedented fiscal experimentEconomic downturns are usually accompanied (and perhaps prolonged) by a tightening of private credit, as you can see on this chart of S&P 500 performance vs commercial and industrial loans from all commercial banks. Lending significantly lags stock market performance, but a downturn in lending generally confirms a recession, and an upturn in lending generally confirms a new bull market. This time, however, is different-- at least in terms of the initial response. The rapid downturn in stocks was met with a huge spike in new private lending, encouraged by massive Fed liquidity, and the recovery of stocks was as sharp as the initial selloff. Now, however, lending has turned back downward, and it's possible that over the next year we could see the same tightening of credit that usually accompanies a recession. The Fed can increase bank reserves, but it can't increase borrowers' collateral or their appetite for risk in a difficult economic environment. Does this downturn in private lending, like the previous ones, confirm that we're in a recession and that stocks will slide from here? Will the next upturn in private lending signal that we're back in a bull market? Only time will tell, but the results of this experiment will have huge ramifications for both policymakers and investors for decades to come. Hat tip to @TayFx for help constructing this chart. Also check out his cool charts of SPX vs. M2 money supply and Fed balance sheet:
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by ChristopherCarrollSmith
17
Gold and Money Supply. Why Gold is a good long-term investment.Here we see the correlation of Gold (XAUUSD) and M1 (money supply composed of physical currency and coin, demand deposits etc). During the last two financial crises (DOTCOM and SUBPRIMES), the central bank raised the rates to support the stock market collapse and save the economy from recession. As you see when rates were raised and money supply spiked, Gold started rising as well as a counter to inflation. Similarly, Gold has spiked since March 2020 when the Fed announced the trillion dollar rescue package to counter the shattered demand from the COVID lockdown. In our opinion that makes Gold a necessity to any investor's portfolio on the long-term. ** If you like our free content follow our profile to get more daily ideas. ** Comments and likes are greatly appreciated.
FRED:WM1NSLong
by InvestingScope
1