Today's decision loop for the Performance portfolio raised a question that sounds simple but turns out to be surprisingly powerful: why does Bitcoin go up when central banks print money? The answer gets to the heart of why the Performance portfolio holds Bitcoin in the first place, and what signal would make it sell.
The Performance portfolio holds a ten-percent stake in IBIT, which is the iShares Bitcoin Trust, a fund that owns Bitcoin directly so investors can buy it through a normal brokerage account like any other stock. When the portfolio launched on May 1, the reasoning for including IBIT was straightforward: global money supply is expanding, and Bitcoin is trading above its long-run average price trend. Both conditions still hold today. Bitcoin rose roughly 2.3 percent today to around 80,740 dollars. But the question worth answering is: why are those two conditions the right criteria at all?
M2 is a measure of how much money is circulating in an economy. It includes cash in people's wallets, balances in checking accounts, and money in savings accounts and short-term certificates of deposit. Every major central bank publishes an M2 figure for their country. When you add them all up across the US, Europe, China, Japan, and other major economies, you get global M2, which is a rough measure of how much money the world's financial system is operating with at any given moment. More money chasing the same number of goods and assets generally pushes prices up. When central banks cut interest rates or buy bonds to inject money into the economy, M2 expands. When they raise rates or sell bonds to remove money from the system, M2 contracts.
Bitcoin has a fixed supply. There will only ever be 21 million coins. This scarcity is built into its code and cannot be changed. So when the quantity of money in the global system increases while the supply of Bitcoin stays constant, the price of Bitcoin in dollar terms tends to rise. Think of it like this: if the number of lottery tickets stays the same but the cash prize grows, each ticket becomes more valuable. This relationship is not perfect. Bitcoin is also driven by sentiment, regulation news, and speculative cycles. But over multi-year periods, the correlation between global M2 growth and Bitcoin's price has been one of the most consistent relationships in financial markets. Bitcoin functions partly as a monetary hedge, similar to how gold behaves when people lose confidence in the purchasing power of government-issued currency.
The mandate for the Performance portfolio specifies two conditions that must both be true for IBIT to stay in the book. First, global M2 must be expanding. Second, Bitcoin must be trading above its 200-day moving average, which is simply the average price of Bitcoin over the last 200 trading days, updated each day. When the current price is above that average, Bitcoin is considered to be in an uptrend. Using two conditions rather than one reduces false signals. Global M2 can be growing while Bitcoin is still in a downtrend because of a regulatory crackdown, for example. Requiring both conditions to be true means the portfolio waits for the macro environment and the price trend to agree before committing capital.
Either condition flipping alone is enough to exit IBIT entirely. If global M2 starts contracting, which happens when major central banks simultaneously raise rates and shrink their balance sheets, the portfolio would sell. This matters because the early months of 2022 showed exactly how fast Bitcoin can fall when the US Federal Reserve, the US central bank, tightened policy aggressively. Bitcoin fell more than 70 percent in that cycle. The M2 contraction had already started months before the price peaked, which is why it functions as a leading signal rather than a lagging one. If Bitcoin falls below its 200-day moving average while M2 is still growing, the portfolio would also exit. That pattern suggests something specific to Bitcoin has broken the price regardless of the monetary backdrop.
Bitcoin is volatile. Even with both conditions green, it can fall 20 to 30 percent in a month before recovering. The Performance portfolio accepts this volatility explicitly because it is chasing maximum absolute return, not smooth returns. For someone who cannot stomach watching their investment drop by a third temporarily, Bitcoin at any allocation is probably the wrong choice. This portfolio is not trying to avoid those swings. It is trying to capture the long-run upside that has historically accompanied them. That trade-off is a deliberate design choice, not an oversight.