Lawrence Lepard Calls Bitcoin A ‘Liquidity Smoke Alarm,’ Explains Why It’s Lagging Despite M2 Growth

• Lawrence Lepard called Bitcoin a "liquidity smoke alarm," which is more sensitive to short-term liquidity than long-term debasement.

• He compared it against gold, which he said was his "pure debasement insurance."

• He said Bitcoin has stayed weak despite growing M2 because system-wide liquidity is currently tight.

Veteran investor and author Lawrence Lepard described Bitcoin (BTC) as a "liquidity smoke alarm" that's more sensitive to short-term liquidity conditions than long-term currency debasement, as opposed to gold, which he described as "pure debasement insurance."

Lepard said on the Honest Money podcast on Friday, responding to a question about why Bitcoin's price has recently decoupled from M2 money-supply growth. M2 is a broad measure of money circulating in the economy, including cash, checking and savings deposits, and money-market funds, whose growth rate traders have long used as a debasement-trade signal for Bitcoin. The theory is that more dollars in the system should mean more demand for risk assets like cryptocurrency.

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Leopard said this divergence came down to how each asset was actually used. "Bitcoin to me is a little bit of a liquidity smoke alarm," he said. "It has a little bit of a tech component to it, a little bit of a shiny object component to it." Gold buyers, he said, "tend to take a long-term view." Bitcoin hasn't been treated the same way yet, he added, "because of the volatility."