The US money supply just hit a number that would make even the most seasoned macro traders do a double-take. M2, the Federal Reserve’s broad measure of dollars sloshing around the economy, climbed to a record $23.052 trillion in May, according to the Fed’s H.6 Money Stock Measures release published on June 23.

That’s a $247.8 billion jump from April’s $22.8045 trillion.

The numbers behind the record

M2 includes everything from physical cash and checking accounts to savings deposits and money market funds.

The year-over-year growth rate hit 5.6% in May, marking the fastest expansion since July 2022. That was the period when the Fed was still grappling with the aftermath of its pandemic-era money printing spree, which had pushed M2 growth into double digits.

After the Fed’s aggressive rate hikes began in 2022, M2 actually contracted for several months, something that hadn’t happened in decades. The current trajectory represents a full reversal of that contraction, with the money supply now firmly in expansion mode and setting fresh records.

What M2 means for crypto

Analysts currently note that Bitcoin remains below its liquidity-implied fair value according to various metrics.

The stablecoin market offers another lens into this dynamic. USD stablecoin supply rose to approximately $312 billion in May, which now accounts for about 1.35% of total US M2.

Rising stablecoin supply is widely viewed as indicative of increasing institutional interest in crypto assets. When large players want exposure to digital asset markets, stablecoins are typically their first port of call, serving as the on-ramp from dollars to everything else.

What this means for investors

The 5.6% annual growth rate is elevated but not below the double-digit rates seen during the pandemic stimulus era.

For crypto-specific investors, the stablecoin data deserves close attention. Stablecoins functioning as 1.35% of M2 represents a milestone in the maturation of digital asset markets.

Investors assessing their strategies should monitor future M2 releases alongside stablecoin dynamics. A continued expansion in both would signal that liquidity conditions remain favorable for risk assets. A divergence, where M2 grows but stablecoin supply flattens, could indicate that institutional appetite for crypto is cooling even as the broader economy floods with cash.