Financial pundit and author Daniel Mark Harrison recently took to social media to highlight the growing recognition of the correlation between the M2 money supply and Bitcoin's (BTC) price, a concept he claims to have introduced in a 2021 paper under the term "Z Efficiency." Harrison expressed satisfaction that the correlation, once "unheard of," is now widely discussed among market participants.
In his tweet, Harrison stated, > "It’s interesting how many people do a M2 / BTC correlation nowadays. Back in ‘21 when I released this paper coining this expression as Z Efficiency it was all but unheard of: [link] Good to see people catching on!"
The correlation between global M2 liquidity and Bitcoin's price has indeed become a significant topic in cryptocurrency market analysis. A recent comprehensive breakdown by Matt Crosby, Lead Analyst at Bitcoin Magazine Pro, presented compelling evidence of this link, noting a "remarkable and consistent correlation—often exceeding 84%" between Bitcoin price and global M2 liquidity levels. This analysis suggests that monetary expansion serves as a key driver for both Bitcoin and broader risk-on asset classes.
M2 money supply, which includes cash, checking deposits, and easily convertible near money, is often viewed as an indicator of overall liquidity in the financial system. Its expansion can lead to increased capital flowing into various assets, including cryptocurrencies. Analysts suggest that monitoring the rate of M2 expansion provides a nuanced view of macroeconomic momentum, influencing speculative assets like Bitcoin with a typical two-month delay in market response.
Harrison, known as an investment professional and founder of Daniel Mark Harrison & Co., has authored several works on financial innovation and blockchain technology. While the specific "Z Efficiency" paper from 2021 linked to M2/BTC correlation remains less widely cited in mainstream financial discourse, the broader concept of M2's influence on Bitcoin's valuation has clearly gained considerable analytical weight since his initial claims.