US M2 money supply hits a record $21.94T, raising hopes for a crypto rally. Bitcoin shows strength despite low institutional interest and a cautious market.
The M2 money supply, a broad gauge of circulating currency including cash, checking deposits, and money market funds, just surpassed its previous peak from March 2022. Year-on-year growth is now at 4.5%, the highest in 3 years, signaling a resurgence in liquidity.
Historically, increases in M2 have preceded inflation. The 2020 rise in M2 contributed to higher inflation in 2021, leading to tighter monetary policy.
BREAKING: The US M2 money supply jumped +4.5% Y/Y in May, to a record $21.94 trillion.
This marks the 19th consecutive monthly increase.
It has now surpassed the previous all-time high of $21.86 trillion, posted in March 2022.
Furthermore, inflation-adjusted M2 money supply… pic.twitter.com/HsCLFZSgAT
— The Kobeissi Letter (@KobeissiLetter) July 1, 2025
Now, as M2 growth picks up again, investors are bracing for potential inflationary pressure, a situation that complicates the Federal Reserve’s ability to cut rates, especially with political pressure mounting to lower them to 1% as proposed by US President Donald Trump.
Bitcoin: channel-bound but resilient
With M2 supply rising, more liquidity means more risk appetite. On the other, the looming threat of inflation and tighter policy could spook markets. Bitcoin BTC $64 128 24h volatility: 1.0% Market cap: $1.28 T Vol. 24h: $45.15 B has been trading inside a descending channel since peaking at $112,000 in May.
Pullbacks have been shallow, with recent price action showing resilience above $105,000. A key CME futures gap at $106K was recently filled, and Bitcoin still trades above its one-month realized price, suggesting short-term holders remain in profit.
#Bitcoin dips remain shallow – so far contained above the 1-month realized price ($105.1K). Other realized prices:
🔸<24h: $105.6K
🔸<1w: $106.3K
🔸<3m: $101.2K
🔸<6m: $98.1KAll short-term holder cohorts are still in profit, signaling improving market momentum. pic.twitter.com/ZCLPKs5O8P
— glassnode (@glassnode) July 2, 2025
Futures show fading institutional appetite
CME Bitcoin futures, a strong indicator of institutional sentiment, unveils further insight.
#Bitcoin CME Futures Gaps 🕳️
Two downside gaps still open in the 4H chart:
🕳️ $108,300 – $107,800
🕳️ $106,600 – $106,300
Don’t be surprised if #BTC dips into them before the next leg up.Gaps tend to get filled.⏳ pic.twitter.com/FiEFLMg8V1
— Titan of Crypto (@Washigorira) June 30, 2025
The premium on three-month rolling futures has dropped to 4.3%, the lowest since October 2023, down from over 10% earlier this year, according to research from 10xResearch. Perpetual futures funding rates have also flipped negative, indicating a growing short bias and a drop in speculative interest.
The decline in basis rates has eroded the appeal of cash-and-carry arbitrage, reducing activity from hedge funds that traditionally help drive inflows during bullish periods.
As a result, it is clear that without strong institutional backing, any rally could remain shallow unless retail sentiment and volume pick up dramatically.
What comes next?
The crypto market sits at a crossroads. The record-high M2 money supply could act as a tailwind, especially if rate cuts eventually materialize. But the current bearish channel in Bitcoin, paired with declining institutional futures activity, tempers near-term expectations.
Still, historical data suggests M2 spikes tend to feed into asset prices after a lag. If inflation remains tame and Fed policy loosens, Crypto Rally 2.0 could be a question of when, not if.
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