Bitcoin’s price movement has been closely linked to global M2 supply with a 12-week lag time, according to analysts on Crypto Twitter. This correlation implies that Bitcoin tends to increase in value around 90 days after a global money supply increase. Recent data suggests that the global M2 supply has risen, leading many to believe that Bitcoin is on the brink of a significant surge. However, the relationship between Bitcoin and global M2 supply is not always consistent, with various factors influencing the correlation.
While short-term volatility in Bitcoin’s price is often driven by liquidity trends, other variables such as ETF inflows, macro policy surprises, and halving narratives can complicate the signal. The correlation between Bitcoin and the global M2 index has varied over time, with fluctuations in the strength of the relationship. Despite these fluctuations, there is a long-term correlation between Bitcoin and global M2 supply, but it is gradually weakening at present. This suggests that Bitcoin may become decoupled from global M2 supply for a period of time.
Bitcoin’s price behavior has displayed decoupling from global M2 supply at key moments, such as during the spot-ETF approvals and Halving excitement in early 2024. This decoupling was evident in negative 30-day correlation figures, which later returned to positive alignment. Short-term price fluctuations in Bitcoin are influenced by factors such as leverage washouts and ETF rebalancing, which introduce noise into the signal. In contrast, slower mean-reverting cycles reflect broader policy regimes and liquidity scenarios that unfold over longer periods.
The recent surge in Bitcoin’s price following a global M2 liquidity increase highlights the amplified sensitivity of the cryptocurrency to external catalysts beyond traditional liquidity models. ETF flows and stablecoin credit expansions represent alternative liquidity streams that impact Bitcoin’s price but are not captured by standard M2 constructs. The slope of M2 momentum may provide more insight into relative changes in liquidity velocity rather than absolute levels, offering a more pragmatic view of market dynamics.
Various macro variables, including U.S. debt ceiling volatility, FOMC guidance on rate cuts, and legislative moves around tariffs, may complicate correlation readings between Bitcoin and global M2 supply in the second quarter of 2025. Regional disparities in M2 figures among major economies also add complexity to the correlation analysis. The revisions to M2 figures and reporting delays further complicate the interpretation of real-time correlations, requiring traders to constantly recalibrate their models.
In conclusion, while the relationship between liquidity and Bitcoin price remains vital, the complexity of various macro factors presents challenges for using macro models in isolation. Traders need to consider ETF market structures, halving cycles, regulatory policies, and other indicators that can influence Bitcoin’s price movement. The liquidity landscape for Bitcoin is evolving, with multiple factors contributing to its price dynamics beyond just global M2 supply.
