Bitcoin and liquidity: M2 money supply, Fed rates and the dollar
Bitcoin runs on liquidity, that is, on how much cheap money is circulating in the economy. We compare it with the US M2 money supply, the Federal Reserve's (Fed) interest rates and balance sheet, the dollar exchange rate, and how big funds are positioned in bitcoin futures on the CME.
Bitcoin and the M2 money supply
M2 is cash plus money in accounts, deposits and retail money market funds in the US. When it grows fast, as in 2020–2021, more money looking for returns enters the system. When it shrinks, as in 2022–2023 (for the first time in decades), risky assets usually face headwinds. We compare year-over-year changes, because the level of M2 itself almost always rises.
Bitcoin: year-over-year change (monthly average, %)
Bitcoin, September 2026 −29%
US M2 money supply: year-over-year change (%)
M2, September 2026 +5.7%
Both charts cover the same months: from January 2019 to the last month with M2 data (the Fed publishes it with a lag of about four weeks). Bitcoin: the month's average price vs the average a year earlier, same as for M2.
| Year | US M2 | Bitcoin |
|---|---|---|
| 2026 (year to date) | +4.9%through September 2026 | −14%through November 9, 2026 |
| 2025 | +4.0% | −6% |
| 2024 | +3.4% | +121% |
| 2023 | −2.4% | +156% |
| 2022 | −1.0% | −64% |
| 2021 | +12.4% | +60% |
| 2020 | +24.5% | +302% |
| 2019 | +6.7% | +94% |
Fed interest rates and balance sheet
The Fed steers liquidity in two ways. The first is the federal funds rate, the price of money banks lend each other overnight, which drives interest rates on loans and deposits. The second is the balance sheet: by buying bonds, the Fed pumps new money into the system, and by letting them mature, it pulls money out.
Federal funds rate (%, weekly)
Effective rate 3.88%Upper bound of the target range 4.00%
The effective rate is the average interest rate on overnight loans between US banks. The Fed sets a target range for it, and the dashed line is the upper bound of that range.
Fed balance sheet total (billions of dollars, weekly)
The balance sheet grows when the Fed buys bonds and adds money to the system (quantitative easing, QE) and shrinks when it lets them mature without replacing them (quantitative tightening, QT). Figures as of each Wednesday.
| Decision (effective date) | Move | Change | New range |
|---|---|---|---|
| Sep 17, 2026 | hike | +0.25 pp | 3.75–4.00% |
| Dec 11, 2025 | cut | −0.25 pp | 3.50–3.75% |
| Oct 30, 2025 | cut | −0.25 pp | 3.75–4.00% |
| Sep 18, 2025 | cut | −0.25 pp | 4.00–4.25% |
| Dec 19, 2024 | cut | −0.25 pp | 4.25–4.50% |
| Nov 8, 2024 | cut | −0.25 pp | 4.50–4.75% |
| Sep 19, 2024 | cut | −0.50 pp | 4.75–5.00% |
| Jul 27, 2023 | hike | +0.25 pp | 5.25–5.50% |
Last 12 months: 1 hike and 1 cut. A new range takes effect the day after the Fed (FOMC) meeting. Green marks a cut: cheaper money usually favors bitcoin, but it's a tendency, not a rule.
The dollar and bitcoin
Bitcoin is priced in dollars, so a weaker dollar usually means a higher price, while a strong dollar tightens financial conditions worldwide. Instead of the popular DXY, we use the Federal Reserve's broad dollar index: it measures the dollar against the currencies of the 26 largest US trading partners, not just six.
Bitcoin and the dollar index: change since start (%, 1 year)
Bitcoin −25.6%Dollar index +0.2%
Start: November 6, 2025. The dollar moves many times more slowly than bitcoin, so its line stays close to zero: what matters is the direction, not the scale.
Rolling correlation of bitcoin with the dollar index (90-day window, 2 years)
Each point is the correlation of daily changes over the previous 90 days. Below zero, bitcoin more often rises when the dollar weakens, and vice versa.
Who trades bitcoin futures on the CME
CME (Chicago Mercantile Exchange) is the largest regulated futures exchange in the US. Every week, the futures market regulator (CFTC) publishes the Commitments of Traders (COT) report, a breakdown of who holds which positions. For financial futures, it splits traders into groups, two of which tell you the most:
- leveraged funds: hedge funds and trend-following money managers. They are often net short because they buy bitcoin or bitcoin ETFs and at the same time sell the pricier futures contract, profiting from the price gap (the so-called basis trade). So this short position isn't a simple bet on a decline;
- asset managers: mutual funds, pension funds and insurance companies, which usually hold long positions.
Net positions on the CME as a percentage of open interest (52 weeks)
Leveraged funds −15%Asset managers +14%
Net means long positions (bets on a rise) minus short ones (bets on a fall). A bar below zero means the group holds more short positions. The cursor shows the value for leveraged funds.
| As of | Open interest | Leveraged: long / short | Leveraged, net | Asset managers: long / short | Asset managers, net |
|---|---|---|---|---|---|
| Nov 3, 2026 | 17,527 | 5114 / 7705 | −2591 | 4379 / 1976 | +2403 |
| Oct 27, 2026 | 20,791 | 5887 / 9866 | −3979 | 4743 / 1989 | +2754 |
| Oct 20, 2026 | 21,040 | 5466 / 10,408 | −4942 | 4851 / 1852 | +2999 |
| Oct 13, 2026 | 20,752 | 5520 / 11,364 | −5844 | 5079 / 1437 | +3642 |
| Oct 6, 2026 | 21,432 | 5731 / 12,583 | −6852 | 5174 / 1642 | +3532 |
| Sep 29, 2026 | 19,596 | 4980 / 11,836 | −6856 | 5069 / 1483 | +3586 |
| Sep 22, 2026 | 22,315 | 4745 / 12,698 | −7953 | 4962 / 1791 | +3171 |
| Sep 15, 2026 | 20,773 | 5545 / 11,899 | −6354 | 4528 / 1768 | +2760 |
Figures in contracts (1 contract = 5 BTC). We leave out dealers (banks and market makers) and small traders, so the long and short positions of the two groups shown don't add up to open interest.
How to use this data
Liquidity is the backdrop, not a timer. Bitcoin's best years came when money was cheap and its supply was growing fast, and its worst when the Fed was raising rates and shrinking its balance sheet. But weeks or months pass between a Fed decision and a price move, and the market often reacts in advance, on expectations alone.
Look at the direction of several indicators at once: accelerating M2, rate cuts, a Fed balance sheet that's growing or has stopped shrinking, and a weakening dollar together add up to favorable conditions. The COT report shows whether large US institutions are adding to or cutting their positions on a regulated market.
FRED data as of November 10, 05:51 (refreshed once a day), CFTC report as of November 3, 2026 (new every Friday). M2 money supply (M2SL series, seasonally adjusted), interest rates (DFF, DFEDTARU, DFEDTARL), Fed balance sheet (WALCL) and broad dollar index (DTWEXBGS): FRED, Federal Reserve Bank of St. Louis (opens in a new tab), source data from the Board of Governors of the Federal Reserve System, public domain. CME positions: CFTC, Commitments of Traders (opens in a new tab), Traders in Financial Futures report (futures only, “Bitcoin, Chicago Mercantile Exchange” market), public domain. Bitcoin: daily closes of the BTC-USDT pair on OKX at 0:00 UTC. We calculate the dollar correlation from days on which the Fed published the index; the index is set at noon in New York, and we take the bitcoin price from the end of the same UTC day, so it's an approximation.
See also: bitcoin vs the US market · economic calendar · bitcoin ETFs · bitcoin cycle indicators · stocks and commodities
Frequently asked questions
What is the M2 money supply?
Does M2 growth mean a higher bitcoin price?
Why do Fed interest rates matter for crypto?
What is the broad dollar index and how is it different from the DXY?
How do you read the COT report for bitcoin?
The data is for information only and is not a recommendation. Risk Warning
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