The Bubble Many Traders Missed: Money Supply Up, Velocity Down

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**Most traders see rising money supply (M2) and assume asset prices will soar.**
But they ignore the **Velocity of Money (M2V)**—and that’s where the real danger is hiding.

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## **The Great Disconnect**

* **Money Supply (M2):** Central banks have flooded markets with liquidity since 2008 and again during the pandemic. Asset prices (tech, crypto, real estate) inflated as this money piled into financial markets.
* **Velocity (M2V):** Velocity has **collapsed to historic lows**, meaning money isn’t circulating in the real economy. It’s trapped in the hands of the wealthy and large institutions.

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## **Why Velocity Matters**

* **Velocity = How fast money moves through the economy.**
A falling velocity means less economic activity and weaker fundamentals—even when money supply is high.
* **Wealth Concentration:** Most of the new money never reaches average consumers. Instead, it fuels speculative bubbles (AI stocks, meme coins, luxury assets) rather than real growth.

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## **The Dangerous Assumption**

> “Money supply is up, so prices must keep rising.”
> **False.**
> Without velocity, rising M2 creates **fragile bubbles** that can collapse when sentiment shifts—just like 2000 and 2008.

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## **What I’m Watching**

* **Rising M2 + Falling M2V = A warning sign.**
* **September 2025 could be a turning point.** Liquidity cracks or overextended bubbles may trigger a sharp unwind.
* Traders who ignore velocity risk being blindsided.



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