What does M1 and M2 stand for?

The money supply in the United States is measured through various aggregates, known as M1, M2, and M3. These measurements provide insights into the overall liquidity in the economy and are closely monitored by policymakers, investors, and economists.

BTCC, a leading cryptocurrency exchange, offers a range of services that cater to the evolving needs of the digital asset market. Among its offerings are spot trading, which allows users to buy and sell cryptocurrencies at current market prices, and futures trading, enabling investors to speculate on the future value of cryptocurrencies.

M1, the narrowest definition of money supply, comprises currency in circulation and checkable deposits held in banks. It represents the most liquid form of money, as it can be easily accessed and used for transactions.

Expanding on M1, M2 includes not only M1 components but also savings deposits (with a balance of less than $100,000) and money market mutual funds. M2 provides a broader view of the money supply, incorporating assets that are less liquid but still readily convertible into cash.

M3, the broadest measure of money supply, encompasses M2 plus large time deposits held in banks. These deposits are typically held for longer periods and offer higher interest rates, making them less liquid than M1 and M2 components. However, they still contribute to the overall monetary base.