The Nasdaq’s surge in value is breaking records, with a market cap relative to the U.S. M2 money supply that has hit a record 176%. Global markets commentator The Kobeissi Letter summed it up in three words:
“This is insane.”
The Nasdaq’s ‘insane’ market cap
As of August 2025, the Nasdaq’s market capitalization shatters the previous Dot-Com Bubble peak by approximately 45 percentage points. Simultaneously, the ratio of Nasdaq’s market cap to U.S. GDP has reached a historic 129%, almost double the highs of March 2000. These levels are raising both eyebrows and alarm on Wall Street.
M2 money supply encompasses all cash, checking deposits, and easily accessible savings, essentially, the “liquid” funds in the U.S. financial system. When the Nasdaq’s total value dwarfs this pool, it means that market valuations are galloping far ahead of the base layer of money underpinning the economy.
In previous cycles, stock market rallies were ultimately anchored by available liquidity. Surpassing the M2 money supply by such a wide margin illustrates an unprecedented disconnect between financial markets and real-world cash or credit growth.
Comparisons with the Dot-Com Bubble are apt: in 2000, the Nasdaq’s meteoric gains ended with a collapse when excess speculation far outpaced money supply and economic fundamentals. Today’s ratios, however, are well beyond those former highs, stoking fears of an even larger asset bubble.
Implications: What could happen next?
When stock valuations become untethered from underlying money growth, markets are more susceptible to sharp and painful corrections. As history showed after the Dot-Com peak, sentiment can turn quickly, and the subsequent cascade can erase trillions in market value overnight.
Today’s surge is heavily concentrated in a handful of giant tech firms, especially those leading AI innovation. This means a downturn in just a few names could spill over into the entire market, intensifying volatility.
With stock values so far above liquid cash levels, any shift in risk appetite, interest rates, or a tightening of credit could drain liquidity from equities fast. Such mismatches magnify systemic risk, as market participants scramble for cash in a sudden downturn.
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Central banks may find themselves pressured to inject more liquidity or risk triggering a deep correction. However, with M2 already at record levels and inflation concerns still present, policy options are limited.
Broader implications for Bitcoin and crypto
A sharp correction in tech equities often sparks a search for non-correlated assets. Bitcoin, with its fixed supply and decentralized nature, is frequently seen as a “digital gold” hedge against both equity bubbles and financial system stress. After major equity shocks in the past, Bitcoin and gold have often seen inflows as alternative stores of value.
Crypto is not immune to market-wide shocks, however. During the COVID crash and after the Dot-Com bust, investors also sold Bitcoin and other risk assets in the initial wave of panic. Thin crypto market liquidity can amplify these sudden swings.
If a market meltdown forces funds and institutions to raise cash, there could be short-term selling pressure for Bitcoin and crypto, especially given recent inflows and speculative positions in ETFs. However, each major crisis tends to inspire renewed interest in alternative financial systems and decentralized assets in the recovery phase.
As the Nasdaq outpaces the real economy, regulators are watching for imbalances. Both securities and crypto market rules could be tightened in response to market volatility or perceived excess.
Never before has the market value of America’s top tech stocks so dramatically outstripped both the money supply and the size of the economy itself. Investors should proceed wth caution and remember the lessons of bubbles past.
