Global Money Supply Hits Record High, But Why Is Bitcoin Struggling?

The global money supply has reached an all-time high of $103.66 trillion in August, according to MacroMicro's tracking of M2 across the US, Euro area, China, and Japan. This marks a 10th straight monthly increase in growth, with the four major central banks adding over $1 trillion in August alone.

While this may seem like good news for assets such as Bitcoin and gold, their prices are actually lagging behind. Bitcoin trades at around $84,650, still 33% below its October peak, while gold has dropped to $4,163, a 26% decline from its January high.

The Fed's decision to raise interest rates to a range of 3.75% to 4% on September 16 and the increasing 10-year Treasury yield of 5.225%, the highest since 2007, are contributing to the weakness in gold and Bitcoin prices. In contrast, stocks have held firm, with the S&P 500 closing at 7,743 on Friday.

Historically, Bitcoin has followed the pace of money growth rather than its size, but recent data suggests that M2 growth has cooled, which may be contributing to the weakness in Bitcoin's price. A rising money supply alone may not lift risk assets, and it remains to be seen whether M2 growth will reaccelerate before yields ease.