Crypto traders and analysts are spotting a potentially bullish signal for Bitcoin as the year-over-year M2 money supply has turned positive for the first time since November 2022. Historically, increasing money supply has preceded Bitcoin outperforming traditional markets as investors seek inflation hedges.

The M2 represents an estimate of all cash, checking deposits, and easily-convertible "near" money like savings accounts and money market funds across the United States. On May 1st, 2024, the year-over-year change in M2 flipped from negative to positive territory, signaling an overall rise in circulating money supply.

This shift has sparked speculation that selling pressure on Bitcoin could start to ease in the coming months. Data from crypto analytics firm Glassnode showed consistent "net outflows across all cohorts" of Bitcoin investors throughout April, contributing to BTC's recent 9.75% price drop over the past 30 days.

Potential Bullish Indicator However, traders view expanding money supply as a signal to start positioning for assets like Bitcoin and crypto that tend to outperform during inflationary periods. The last time M2 turned positive year-over-year was in October 2022, preceding Bitcoin's late 2022 rally from around $19,000 to over $25,000.

"For the first time, M2 Money Supply is 'year-over-year' positive," noted trader and author Oliver Velez in a bullish tweet. "Any and all dips are buyable. We are nowhere near the end of Bitcoin's bull."

While the M2 shift doesn't automatically trigger Bitcoin price rises, it does reflect changing macro conditions that could reduce sell-side pressure as demand for inflation hedges picks up.

Other traders echoed the bullish M2 outlook, with account InvestAnswers declaring "M2 money supply set to explode! Bitcoin..And here...we...go!"

Raoul Pal had previously highlighted the M2 indicator in October 2022, stating "this is when BTC outperforms the NDX and crypto becomes the Super Massive Black Hole."

Of course, Bitcoin price movements depend on many technical, sentiment, and macro factors. But the move in M2 supply is viewed by many as a favorable tailwind that could start alleviating recent bearish forces if the trend continues.

After several months of tightening, an expanding monetary backdrop could reinvigorate interest in Bitcoin and crypto as inflation hedges, reducing the incentive to sell. Traders will be watching closely for any demand resurgence in the coming weeks.