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Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $NFLX ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 30.42x
โข3-Year Mean: 34.87x
โขNTM FCF Yield: 2.61%
โข3-Year Mean: 2.41%
As you can see, $NFLX appears to be trading below fair value
Going forward, investors can expect to receive ~15% MORE in earnings per share & ~8% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $NFLX is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $9.32B
โขLong-Term Debt: $14.46B
$NFLX has a strong balance sheet, an A S&P Credit Rating & 13x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2021: 18.2%
โข2022: 14.9%
โข2023: 18.5%
โข2024: 24.3%
โขLTM: 29.4%
RETURN ON EQUITYโ
โข2021: 38.0%
โข2022: 24.5%
โข2023: 26.1%
โข2024: 38.4%
โขLTM: 42.9%
$NFLX has great return metrics, highlighting the financial efficiency of the business
REVENUEโ
โข2019: $20.16B
โข2025E: $45.09B
โขCAGR: 14.36%
FREE CASH FLOWโโก๏ธโ
โข2019: ($3.14B)
โข2025E: $9.18B
NORMALIZED EPSโ
โข2019: $0.41
โข2025E: $2.54
โขCAGR: 35.52%
SHARE BUYBACKSโ
โข2019 Shares Outstanding: 4.38B
โขLTM Shares Outstanding: 4.26B
By reducing its shares outstanding ~3%, $NFLX increased its EPS by ~3% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 48.1%
โขLTM Operating Margins: 29.1%
โขLTM Net Income Margins: 24.0%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~15% MORE in EPS & ~8% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $NFLX has to grow earnings at a 15.21% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2027 EPS growth over the next few years to be more than the (15.21%) required growth rate:
2025E: $2.54 (28% YoY) *FY Dec
2026E: $3.24 (28% YoY)
2027E: $3.91 (20% YoY)
$NFLX has an ok track record of meeting analyst estimates ~2 years out, but letโs assume $NFLX ends 2027 with $3.91 in EPS & see its CAGR potential assuming different multiples
32x P/E: $125๐ต โฆ ~15.6% CAGR
31x P/E: $121๐ต โฆ ~13.8% CAGR
30x P/E: $117๐ต โฆ ~12.0% CAGR
29x P/E: $113๐ต โฆ ~10.1% CAGR
28x P/E: $109๐ต โฆ ~8.2% CAGR
27x P/E: $105๐ต โฆ ~6.3% CAGR
As you can see, weโd have to assume a >29x multiple for $NFLX to have attractive return potential
At 29x earnings $NFLX has ok CAGR potential
At 30x $NFLX has attractive return potential without assuming any multiple expansion
$NFLX remains the content king โ with unmatched scale, global reach, & pricing power
With a long runway ahead & shares modestly undervalued, I consider $NFLX an attractive consideration today at $93๐ต (with little margin of safety)
I consider $NFLX a strong consideration with a large margin of safety at $82๐ต, where I can reasonably expect ~13% CAGR while assuming a more conservative 27x
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ
๐๐ก๐ข๐ฌ ๐๐จ๐ง๐ญ๐๐ง๐ญ ๐ข๐ฌ ๐ฉ๐ซ๐จ๐ฏ๐ข๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐๐ง๐ ๐๐๐ฎ๐๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐๐จ๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐, ๐๐ง ๐จ๐๐๐๐ซ, ๐จ๐ซ ๐ ๐ฌ๐จ๐ฅ๐ข๐๐ข๐ญ๐๐ญ๐ข๐จ๐ง ๐ญ๐จ ๐๐ฎ๐ฒ ๐จ๐ซ ๐ฌ๐๐ฅ๐ฅ ๐๐ง๐ฒ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ฒ.
๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐จ๐ฅ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐. ๐๐ง๐ฒ ๐จ๐ฉ๐ข๐ง๐ข๐จ๐ง๐ฌ ๐๐ฑ๐ฉ๐ซ๐๐ฌ๐ฌ๐๐ ๐๐ซ๐ ๐๐ฌ ๐จ๐ ๐ญ๐ก๐ ๐๐๐ญ๐ ๐จ๐ ๐ฉ๐ฎ๐๐ฅ๐ข๐๐๐ญ๐ข๐จ๐ง ๐๐ง๐ ๐ฌ๐ฎ๐๐ฃ๐๐๐ญ ๐ญ๐จ ๐๐ก๐๐ง๐ ๐ ๐ฐ๐ข๐ญ๐ก๐จ๐ฎ๐ญ ๐ง๐จ๐ญ๐ข๐๐.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐ ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐๐๐ฎ๐ซ๐๐๐ฒ ๐จ๐ซ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
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A quality valuation analysis on $NFLX ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 30.42x
โข3-Year Mean: 34.87x
โขNTM FCF Yield: 2.61%
โข3-Year Mean: 2.41%
As you can see, $NFLX appears to be trading below fair value
Going forward, investors can expect to receive ~15% MORE in earnings per share & ~8% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $NFLX is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $9.32B
โขLong-Term Debt: $14.46B
$NFLX has a strong balance sheet, an A S&P Credit Rating & 13x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2021: 18.2%
โข2022: 14.9%
โข2023: 18.5%
โข2024: 24.3%
โขLTM: 29.4%
RETURN ON EQUITYโ
โข2021: 38.0%
โข2022: 24.5%
โข2023: 26.1%
โข2024: 38.4%
โขLTM: 42.9%
$NFLX has great return metrics, highlighting the financial efficiency of the business
REVENUEโ
โข2019: $20.16B
โข2025E: $45.09B
โขCAGR: 14.36%
FREE CASH FLOWโโก๏ธโ
โข2019: ($3.14B)
โข2025E: $9.18B
NORMALIZED EPSโ
โข2019: $0.41
โข2025E: $2.54
โขCAGR: 35.52%
SHARE BUYBACKSโ
โข2019 Shares Outstanding: 4.38B
โขLTM Shares Outstanding: 4.26B
By reducing its shares outstanding ~3%, $NFLX increased its EPS by ~3% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 48.1%
โขLTM Operating Margins: 29.1%
โขLTM Net Income Margins: 24.0%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~15% MORE in EPS & ~8% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $NFLX has to grow earnings at a 15.21% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2027 EPS growth over the next few years to be more than the (15.21%) required growth rate:
2025E: $2.54 (28% YoY) *FY Dec
2026E: $3.24 (28% YoY)
2027E: $3.91 (20% YoY)
$NFLX has an ok track record of meeting analyst estimates ~2 years out, but letโs assume $NFLX ends 2027 with $3.91 in EPS & see its CAGR potential assuming different multiples
32x P/E: $125๐ต โฆ ~15.6% CAGR
31x P/E: $121๐ต โฆ ~13.8% CAGR
30x P/E: $117๐ต โฆ ~12.0% CAGR
29x P/E: $113๐ต โฆ ~10.1% CAGR
28x P/E: $109๐ต โฆ ~8.2% CAGR
27x P/E: $105๐ต โฆ ~6.3% CAGR
As you can see, weโd have to assume a >29x multiple for $NFLX to have attractive return potential
At 29x earnings $NFLX has ok CAGR potential
At 30x $NFLX has attractive return potential without assuming any multiple expansion
$NFLX remains the content king โ with unmatched scale, global reach, & pricing power
With a long runway ahead & shares modestly undervalued, I consider $NFLX an attractive consideration today at $93๐ต (with little margin of safety)
I consider $NFLX a strong consideration with a large margin of safety at $82๐ต, where I can reasonably expect ~13% CAGR while assuming a more conservative 27x
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ
๐๐ก๐ข๐ฌ ๐๐จ๐ง๐ญ๐๐ง๐ญ ๐ข๐ฌ ๐ฉ๐ซ๐จ๐ฏ๐ข๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐๐ง๐ ๐๐๐ฎ๐๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐๐จ๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐, ๐๐ง ๐จ๐๐๐๐ซ, ๐จ๐ซ ๐ ๐ฌ๐จ๐ฅ๐ข๐๐ข๐ญ๐๐ญ๐ข๐จ๐ง ๐ญ๐จ ๐๐ฎ๐ฒ ๐จ๐ซ ๐ฌ๐๐ฅ๐ฅ ๐๐ง๐ฒ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ฒ.
๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐จ๐ฅ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐. ๐๐ง๐ฒ ๐จ๐ฉ๐ข๐ง๐ข๐จ๐ง๐ฌ ๐๐ฑ๐ฉ๐ซ๐๐ฌ๐ฌ๐๐ ๐๐ซ๐ ๐๐ฌ ๐จ๐ ๐ญ๐ก๐ ๐๐๐ญ๐ ๐จ๐ ๐ฉ๐ฎ๐๐ฅ๐ข๐๐๐ญ๐ข๐จ๐ง ๐๐ง๐ ๐ฌ๐ฎ๐๐ฃ๐๐๐ญ ๐ญ๐จ ๐๐ก๐๐ง๐ ๐ ๐ฐ๐ข๐ญ๐ก๐จ๐ฎ๐ญ ๐ง๐จ๐ญ๐ข๐๐.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐ ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐๐๐ฎ๐ซ๐๐๐ฒ ๐จ๐ซ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
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Offshore
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EndGame Macro
Silver Is Repricing In A Fractured World
Silver at $76 is the kind of move you see when a market quietly changes roles. For years, silver was ignored, dead money unless inflation dominated the headlines. Then, around early February 2025, its behavior changed.
That timing matters. February marked a clear turn in trade policy. New tariffs on China werenโt framed as a short term negotiating tactic, but as part of an emergency posture. That signaled a more permanent break in how global trade would function. Markets didnโt wait for full escalation. Behavior adjusted first.
Silver didnโt explode overnight. It simply stopped falling. Higher lows held. Pullbacks got bought. That was the regime shift. The vertical move everyoneโs reacting to now came later, when thin liquidity met forced buying and silver did what it always does, it moved fast and violently.
What confirms this isnโt just paper positioning is Shanghai silver trading above $82 while COMEX sits at $76. When China is willing to pay a real premium, thatโs not speculation, itโs physical demand showing up where price sensitivity matters most.
Why China Matters
Put yourself in Chinaโs position.
Youโre running a massive and still growing trade surplus. Relations with the West are openly hostile, sanctions risk is real, and the old assumption that surplus capital safely recycles into Western assets is breaking down.
Now look at home. Chinaโs property market, the main store of household wealth is no longer a one way bet. Prices are falling, confidence is damaged, and leverage is unwinding. Real estate is no longer the default place to park savings.
So the question becomes where do you preserve wealth in a deflationary environment?
Capital controls limit outbound flows. Trust in foreign financial assets is weaker. Domestic property is declining. In deflation, leverage fails and growth assets disappoint. That leaves tangible, liquid assets outside the credit system. Gold is the first choice. Silver becomes the spillover.
This isnโt just central banks. Itโs households. And in deflation, flows donโt rotate smoothly, they surge. In a market as small as silver, persistence shows up in price quickly.
The Global Layer
This isnโt only a China story.
Globally, silverโs industrial demand keeps accelerating. Solar installations are hitting records across China, Europe, and the U.S. EVs and charging infrastructure add steady demand. Silver gets consumed, it doesnโt come back in a market thatโs been in structural deficit for five straight years.
India adds another leg. Despite record prices, physical imports surged again in late 2025. Festival demand and investment buying pulled metal east. Mine supply is flat. Recycling canโt close the gap. Shanghai premiums and backwardation arenโt anomalies, theyโre signs of physical metal being absorbed worldwide.
Why Tariffs Are The Accelerant
Tariffs donโt spike prices by themselves. They change behavior.
Once companies and households believe supply chains are becoming less reliable and inputs may cost more later, they stop trusting just in time systems and start buying ahead. Demand gets pulled forward. Spot markets tighten quietly then suddenly.
Tariffs also weaken the old surplus recycling loop. In a deflationary world, when that loop breaks, financial assets deflate first. Hard assets benefit. Gold absorbs the conservative flow. Silver absorbs the reflexive one.
The Part People Forget
This isnโt a simple inflation hedge. Itโs deflation colliding with deglobalization, policy easing, broken capital recycling, industrial demand, and physical scarcity.
Silver overshoots. It snaps back. That doesnโt negate whatโs happening, itโs how silver behaves when trust, not growth, is being repriced.
BREAKING: Silver prices extend gains to +6% on the day, now at a record $76/oz.
Silver is now on track for its largest monthly gain since December 1979. https://t.co/6pZgLG60OX - The Kobeissi Letter tweet
Silver Is Repricing In A Fractured World
Silver at $76 is the kind of move you see when a market quietly changes roles. For years, silver was ignored, dead money unless inflation dominated the headlines. Then, around early February 2025, its behavior changed.
That timing matters. February marked a clear turn in trade policy. New tariffs on China werenโt framed as a short term negotiating tactic, but as part of an emergency posture. That signaled a more permanent break in how global trade would function. Markets didnโt wait for full escalation. Behavior adjusted first.
Silver didnโt explode overnight. It simply stopped falling. Higher lows held. Pullbacks got bought. That was the regime shift. The vertical move everyoneโs reacting to now came later, when thin liquidity met forced buying and silver did what it always does, it moved fast and violently.
What confirms this isnโt just paper positioning is Shanghai silver trading above $82 while COMEX sits at $76. When China is willing to pay a real premium, thatโs not speculation, itโs physical demand showing up where price sensitivity matters most.
Why China Matters
Put yourself in Chinaโs position.
Youโre running a massive and still growing trade surplus. Relations with the West are openly hostile, sanctions risk is real, and the old assumption that surplus capital safely recycles into Western assets is breaking down.
Now look at home. Chinaโs property market, the main store of household wealth is no longer a one way bet. Prices are falling, confidence is damaged, and leverage is unwinding. Real estate is no longer the default place to park savings.
So the question becomes where do you preserve wealth in a deflationary environment?
Capital controls limit outbound flows. Trust in foreign financial assets is weaker. Domestic property is declining. In deflation, leverage fails and growth assets disappoint. That leaves tangible, liquid assets outside the credit system. Gold is the first choice. Silver becomes the spillover.
This isnโt just central banks. Itโs households. And in deflation, flows donโt rotate smoothly, they surge. In a market as small as silver, persistence shows up in price quickly.
The Global Layer
This isnโt only a China story.
Globally, silverโs industrial demand keeps accelerating. Solar installations are hitting records across China, Europe, and the U.S. EVs and charging infrastructure add steady demand. Silver gets consumed, it doesnโt come back in a market thatโs been in structural deficit for five straight years.
India adds another leg. Despite record prices, physical imports surged again in late 2025. Festival demand and investment buying pulled metal east. Mine supply is flat. Recycling canโt close the gap. Shanghai premiums and backwardation arenโt anomalies, theyโre signs of physical metal being absorbed worldwide.
Why Tariffs Are The Accelerant
Tariffs donโt spike prices by themselves. They change behavior.
Once companies and households believe supply chains are becoming less reliable and inputs may cost more later, they stop trusting just in time systems and start buying ahead. Demand gets pulled forward. Spot markets tighten quietly then suddenly.
Tariffs also weaken the old surplus recycling loop. In a deflationary world, when that loop breaks, financial assets deflate first. Hard assets benefit. Gold absorbs the conservative flow. Silver absorbs the reflexive one.
The Part People Forget
This isnโt a simple inflation hedge. Itโs deflation colliding with deglobalization, policy easing, broken capital recycling, industrial demand, and physical scarcity.
Silver overshoots. It snaps back. That doesnโt negate whatโs happening, itโs how silver behaves when trust, not growth, is being repriced.
BREAKING: Silver prices extend gains to +6% on the day, now at a record $76/oz.
Silver is now on track for its largest monthly gain since December 1979. https://t.co/6pZgLG60OX - The Kobeissi Letter tweet
Offshore
Photo
EndGame Macro
Bitcoin Is Trading Like Risk And Metals Like Money
When a market is crowded with long perps, price doesnโt gently drift lower, it air drops. One level breaks, stops trigger, liquidations cascade, and the selling turns mechanical. Thatโs how you get a $3k move in under an hour. Not a new fundamental. Just positioning meeting thin liquidity.
Now look at whatโs happening at the same time. Gold and silver are catching a bid like money, not like a trade. Silver ripping while Bitcoin wicks lower is the tape telling you where unlevered demand is going. In a deflationary impulse, people donโt reach for optionality first they reach for collateral. Metals benefit because theyโre simple, liquid, and nobody can margin call the atoms.
Why Bitcoin Isnโt Following M2
People love the Bitcoin vs. global M2 chart like itโs a law of physics. It isnโt.
M2 tells you money exists, not where itโs willing to go. Bitcoin is a marginal asset, it trades on risk appetite, leverage, and market plumbing. Those are very different things.
If weโre sliding toward deflation, liquidity doesnโt behave like it did in 2020. It gets trapped.
It gets trapped in T-bills and money funds because risk free yield is still real competition. It gets trapped on balance sheets because refinancing walls, rising delinquencies, and tighter credit force cash to be used defensively. And in crypto specifically, it gets trapped because the transmission mechanism isnโt bank depositsโฆitโs stablecoins, leverage, and derivatives credit. If stablecoin growth slows, if exchanges tighten margin, if funding flips, Bitcoin can lag liquidity for a long time even while the aggregate money number rises.
Thatโs the core divergence where global M2 can go up while risk liquidity goes down. One means money exists. The other means money is willing to take volatility.
My View
This is what easing looks like when it starts for bad reasons.
The system gets more liquidity, but the private sector is deleveraging. Households are stressed. Credit quality is deteriorating at the edges. Cash is being used to refinance, roll debt, and plug holes, not to chase upside.
In that world, the first winners arenโt high beta trades. Theyโre collateral and scarcity assets like cash, bills, gold and sometimes silver when supply is already tight and momentum kicks in.
Bitcoin is just being treated like what it still mostly is in this phase which is a levered risk asset. It will catch up when the plumbing turns back on and when liquidation cycles clear, when stablecoin credit expands again, and when people stop using liquidity to repair balance sheets and start using it to take risk.
Until then, expect more of these fast, ugly flushes in BTC and a steadier bid in assets that donโt need leverage to work.
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Bitcoin Is Trading Like Risk And Metals Like Money
When a market is crowded with long perps, price doesnโt gently drift lower, it air drops. One level breaks, stops trigger, liquidations cascade, and the selling turns mechanical. Thatโs how you get a $3k move in under an hour. Not a new fundamental. Just positioning meeting thin liquidity.
Now look at whatโs happening at the same time. Gold and silver are catching a bid like money, not like a trade. Silver ripping while Bitcoin wicks lower is the tape telling you where unlevered demand is going. In a deflationary impulse, people donโt reach for optionality first they reach for collateral. Metals benefit because theyโre simple, liquid, and nobody can margin call the atoms.
Why Bitcoin Isnโt Following M2
People love the Bitcoin vs. global M2 chart like itโs a law of physics. It isnโt.
M2 tells you money exists, not where itโs willing to go. Bitcoin is a marginal asset, it trades on risk appetite, leverage, and market plumbing. Those are very different things.
If weโre sliding toward deflation, liquidity doesnโt behave like it did in 2020. It gets trapped.
It gets trapped in T-bills and money funds because risk free yield is still real competition. It gets trapped on balance sheets because refinancing walls, rising delinquencies, and tighter credit force cash to be used defensively. And in crypto specifically, it gets trapped because the transmission mechanism isnโt bank depositsโฆitโs stablecoins, leverage, and derivatives credit. If stablecoin growth slows, if exchanges tighten margin, if funding flips, Bitcoin can lag liquidity for a long time even while the aggregate money number rises.
Thatโs the core divergence where global M2 can go up while risk liquidity goes down. One means money exists. The other means money is willing to take volatility.
My View
This is what easing looks like when it starts for bad reasons.
The system gets more liquidity, but the private sector is deleveraging. Households are stressed. Credit quality is deteriorating at the edges. Cash is being used to refinance, roll debt, and plug holes, not to chase upside.
In that world, the first winners arenโt high beta trades. Theyโre collateral and scarcity assets like cash, bills, gold and sometimes silver when supply is already tight and momentum kicks in.
Bitcoin is just being treated like what it still mostly is in this phase which is a levered risk asset. It will catch up when the plumbing turns back on and when liquidation cycles clear, when stablecoin credit expands again, and when people stop using liquidity to repair balance sheets and start using it to take risk.
Until then, expect more of these fast, ugly flushes in BTC and a steadier bid in assets that donโt need leverage to work.
BREAKING: Bitcoin falls nearly -$3,000 in 45 minutes as $70 million worth of levered longs are liquidated. https://t.co/ffFp8vlU1m tweet
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M2 Hit A Record, But The Rate Of Change Is Slowing
Yes, M2 just hit a record. That sounds like liquidity is everywhere but thatโs not how this works.
M2 is a level. Itโs the accumulated stock of cash like balances sitting in the system that includes deposits, savings and money funds. Over long stretches, that number almost always rises. Bigger economy, higher nominal prices, more financial plumbing. Thatโs the baseline.
The mistake is treating the level like itโs the driver. Markets donโt move on the amount of money, they move on the change in momentum of money.
The Rate Of Change Is What Actually Moves Markets
When you look at it year over year, M2 is up about +4.3% YoY as of November 2025 but once you adjust for inflation, real M2 is only up about +1.5% YoY. Thatโs a turnaround from the contraction phase, but itโs not a surge.
More importantly, the acceleration already happened. The sharp positive impulse, the moment when money growth flipped from deeply negative to positive is behind us. Since then, the growth rate has been decelerating, not reaccelerating.
That matters because markets tend to react strongest at inflection points. The first derivative of growth turning positive gave you relief. The second derivative of growth speeding up or slowing down tells you whether risk appetite should expand or contract.
Right now, that second derivative is flattening. Money is growing, but less enthusiastically each month.
Think of it like the system took its foot off the brake. It didnโt step on the gas.
Why This Isnโt Easy Money In Practice
In a healthy expansion, rising money supply shows up as higher velocity. Cash moves. It gets spent, invested, levered, recycled. Thatโs when asset prices broadly inflate.
Thatโs not whatโs happening now.
Instead, money is accumulating defensively. Itโs sitting in money funds, T-bills, short duration instruments. Itโs being used to refinance debt, roll maturities, absorb losses, and rebuild buffers. The velocity side of the equation is still weak.
This is why you can haveโฆ
โข record M2,
โข rising delinquencies,
โข weak consumer sentiment,
โข higher bankruptcies,
โข and fragile risk markets
all at the same time.
The money exists, but itโs being treated like insurance, not fuel.
Historical Context Matters Here
When M2 growth explodes like in 2020 it overwhelms everything. Velocity spikes, risk appetite explodes, correlations tighten, and almost all assets rise together.
But when M2 growth merely stabilizes after a contraction, the system behaves very differently. That pattern shows up in late cycle and post crisis periods where policymakers are trying to prevent collapse, not engineer a boom.
This looks much closer to damage control liquidity than expansionary liquidity.
My View
Record M2 doesnโt mean the system is flush. It means the system is cautious.
The growth rate turning positive tells you the tightening phase is over. The growth rate slowing tells you the easing phase is defensive, not aggressive.
For this to turn into a true risk on environment, youโd need to seeโฆ
โข reacceleration in M2 growth,
โข rising velocity,
โข improving credit quality,
โข and willingness to take balance sheet risk again.
Until then, money will keep piling up without circulating.
The cash is there.
The confidence is not.
tweet
M2 Hit A Record, But The Rate Of Change Is Slowing
Yes, M2 just hit a record. That sounds like liquidity is everywhere but thatโs not how this works.
M2 is a level. Itโs the accumulated stock of cash like balances sitting in the system that includes deposits, savings and money funds. Over long stretches, that number almost always rises. Bigger economy, higher nominal prices, more financial plumbing. Thatโs the baseline.
The mistake is treating the level like itโs the driver. Markets donโt move on the amount of money, they move on the change in momentum of money.
The Rate Of Change Is What Actually Moves Markets
When you look at it year over year, M2 is up about +4.3% YoY as of November 2025 but once you adjust for inflation, real M2 is only up about +1.5% YoY. Thatโs a turnaround from the contraction phase, but itโs not a surge.
More importantly, the acceleration already happened. The sharp positive impulse, the moment when money growth flipped from deeply negative to positive is behind us. Since then, the growth rate has been decelerating, not reaccelerating.
That matters because markets tend to react strongest at inflection points. The first derivative of growth turning positive gave you relief. The second derivative of growth speeding up or slowing down tells you whether risk appetite should expand or contract.
Right now, that second derivative is flattening. Money is growing, but less enthusiastically each month.
Think of it like the system took its foot off the brake. It didnโt step on the gas.
Why This Isnโt Easy Money In Practice
In a healthy expansion, rising money supply shows up as higher velocity. Cash moves. It gets spent, invested, levered, recycled. Thatโs when asset prices broadly inflate.
Thatโs not whatโs happening now.
Instead, money is accumulating defensively. Itโs sitting in money funds, T-bills, short duration instruments. Itโs being used to refinance debt, roll maturities, absorb losses, and rebuild buffers. The velocity side of the equation is still weak.
This is why you can haveโฆ
โข record M2,
โข rising delinquencies,
โข weak consumer sentiment,
โข higher bankruptcies,
โข and fragile risk markets
all at the same time.
The money exists, but itโs being treated like insurance, not fuel.
Historical Context Matters Here
When M2 growth explodes like in 2020 it overwhelms everything. Velocity spikes, risk appetite explodes, correlations tighten, and almost all assets rise together.
But when M2 growth merely stabilizes after a contraction, the system behaves very differently. That pattern shows up in late cycle and post crisis periods where policymakers are trying to prevent collapse, not engineer a boom.
This looks much closer to damage control liquidity than expansionary liquidity.
My View
Record M2 doesnโt mean the system is flush. It means the system is cautious.
The growth rate turning positive tells you the tightening phase is over. The growth rate slowing tells you the easing phase is defensive, not aggressive.
For this to turn into a true risk on environment, youโd need to seeโฆ
โข reacceleration in M2 growth,
โข rising velocity,
โข improving credit quality,
โข and willingness to take balance sheet risk again.
Until then, money will keep piling up without circulating.
The cash is there.
The confidence is not.
BREAKING: US M2 money supply rises another +4.3% YoY in November 2025, to a record $22.3 trillion.
This marks the 21st consecutive monthly increase.
Money supply is now $400 billion above the March 2022 peak.
Since 2000, money in circulation has grown at an average rate of +6.3% per annum.
Meanwhile, inflation-adjusted M2 rose +1.5% YoY in November, marking its 15th-straight monthly increase.
The US Dollar's purchasing power is deteriorating. tweet
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EndGame Macro
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RT @DiMartinoBooth: New Year, New Goals โ A Discount Offer from QI Research
Take advantage of our New Year offer and Save 20% on a subscription to The Daily Feather now or to our QI Pro Subscription โ
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