gistfile1.txt

Now, when I plot ISMPMI (Institute for Supply Management Purchasing Managers' Index) with a 9-month delay, as well as M2 Global Money Supply (inflation) with an exact 11-week delay over today's Bitcoin price in USD, the charts almost perfectly match all the way back to September 2023.

Original chart with M2 and Bitcoin here: https://lnkd.in/gVYDGAvA

In other words, it suggests that Bitcoin's price today follows the M2 Global Money Supply of 11 weeks and the ISMPMI of 9 months ago.

Even before September 2023, both are correlated very closely.

Here is the thesis...

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ISMPMI stands for "Institute for Supply Management Purchasing Managers' Index".

It is a monthly economic indicator that measures the health of the manufacturing sector in the United States by surveying purchasing managers at manufacturing firms, essentially showing whether the manufacturing activity is expanding or contracting and by how much.

The PMIISM leads the "real" economy since businesses adjust production before consumer spending follows.

A decline in PMIISM signals weaker economic growth, which later prompts central banks to ease monetary policy.

A rise in PMIISM signals stronger economic growth, which later prompts central banks to tighten monetary policy.

If PMIISM bottoms, liquidity injections typically follow within months as policymakers react to economic weakness.

Bitcoin, being highly sensitive to liquidity and risk appetite, benefits later as liquidity filters into speculative assets.

If PMIISM tops, liquidity injections typically slow within months as policymakers react to economic strength.

Bitcoin, being highly sensitive to liquidity and risk appetite, does not benefit later as liquidity flows out of speculative assets.

By my calculations, PMIISM leads liquidity, in this case, M2 money supply by 168 days/24 weeks/6 months.

And it leads the Bitcoin price by 245 days/35 weeks/9 months.

The M2 Money Supply reacts directly to central bank monetary policies (QE/QT, rates, etc) and credit conditions.

There is a time lag from PMIISMs signals of economic weakness or strength due to:

Policy transmission delay (rate cuts/hikes take weeks) and the process of liquidity reaching banks, markets, and, finally, risk assets.

Once M2 increases or decreases, Bitcoin typically reacts first among risk assets due to its sensitivity to liquidity.

By my calculations, M2 Money Supply leads Bitcoin price by 77 days/11 weeks/3 months.

Whatever happens now in the ISMPMI will probably be reflected in the M2 Money Supply in 6 months and 11 weeks later in Bitcoin price.


source:
- https://www.linkedin.com/feed/update/urn:li:activity:7301914286166024192/
- https://en.macromicro.me/charts/3439/major-bank-m2-comparsion