Key Takeaways
- • Alphractal founder Joao Wedson argues that the ratio of combined central bank balance sheets to Global M2 gives a more useful read on Bitcoin's liquidity backdrop than headline money supply growth alone.
- • The ratio falls when broad money expands faster than central bank assets, so record M2 totals can coexist with a weakening liquidity signal for Bitcoin.
- • Per the Federal Reserve's Sept. 22 release, US M2 reached about $23.34 trillion in August 2026, up roughly 5.7% year over year, while bank reserve balances fell from about $3.28 trillion to $2.94 trillion over the same period.
- • The ratio is a context tool rather than a flow measure or reliable rally signal: it compares monetary stocks and does not track money entering crypto exchanges, funds, or wallets.
Summary
A growing global money supply does not automatically translate into a Bitcoin rally, according to Alphractal founder Joao Wedson, who argues that investors overlooking central bank balance sheets may be misreading the liquidity picture. His analysis compares the combined balance sheets of tracked central banks with global M2 rather than treating broad money growth as a standalone bullish signal. According to Wedson, Bitcoin has historically benefited when central bank balance sheets strengthened relative to the money supply, and since 2021 their relative weakness has helped explain why expanding monetary aggregates have not consistently delivered stronger cryptocurrency markets.
The calculation divides the combined balance sheets of selected central banks by global M2. A rising ratio indicates central bank assets growing faster than broad money, or broad money declining more slowly; a falling ratio indicates broad money outpacing central bank balance sheets. If global M2 grows while central bank assets are unchanged, the ratio falls even as the headline money supply reaches new highs. Wedson wrote that "Global M2 can keep rising indefinitely, but what matters most is the relative strength of central bank balance sheets."
US figures illustrate the distinction. The Federal Reserve's Sept. 22 release showed seasonally adjusted M2 at approximately $23.34 trillion in August 2026, up from $22.09 trillion a year earlier, a rise of roughly 5.7%. Over the same period, bank reserve balances fell from about $3.28 trillion to $2.94 trillion. These are US rather than global figures. Broad money can expand through private credit creation as commercial banks extend loans, so growing deposits do not establish where money is going or whether holders are willing to take risk.
The ratio has limits. It does not directly measure money entering exchanges, investment funds, or Bitcoin wallets, and shifts in liability composition, such as Treasury balances at the Fed, can reduce reserves without changing central bank total assets. Global comparisons add complications from currency definitions, publication schedules, and exchange-rate conversions. A historical relationship also does not establish that the ratio causes Bitcoin's price moves. The takeaway is narrower than the headline suggests: record broad money totals are not sufficient evidence of an approaching rally.
The calculation divides the combined balance sheets of selected central banks by global M2. A rising ratio indicates central bank assets growing faster than broad money, or broad money declining more slowly; a falling ratio indicates broad money outpacing central bank balance sheets. If global M2 grows while central bank assets are unchanged, the ratio falls even as the headline money supply reaches new highs. Wedson wrote that "Global M2 can keep rising indefinitely, but what matters most is the relative strength of central bank balance sheets."
US figures illustrate the distinction. The Federal Reserve's Sept. 22 release showed seasonally adjusted M2 at approximately $23.34 trillion in August 2026, up from $22.09 trillion a year earlier, a rise of roughly 5.7%. Over the same period, bank reserve balances fell from about $3.28 trillion to $2.94 trillion. These are US rather than global figures. Broad money can expand through private credit creation as commercial banks extend loans, so growing deposits do not establish where money is going or whether holders are willing to take risk.
The ratio has limits. It does not directly measure money entering exchanges, investment funds, or Bitcoin wallets, and shifts in liability composition, such as Treasury balances at the Fed, can reduce reserves without changing central bank total assets. Global comparisons add complications from currency definitions, publication schedules, and exchange-rate conversions. A historical relationship also does not establish that the ratio causes Bitcoin's price moves. The takeaway is narrower than the headline suggests: record broad money totals are not sufficient evidence of an approaching rally.
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