The global money supply M2 has reached a record-breaking $108.2 trillion, reflecting a 3.5% increase since the beginning of the year. M2 includes cash, checking accounts, and easily convertible assets, serving as a key indicator of global liquidity.
Typically, an expanding M2 money supply increases capital availability, often leading to higher prices for risk assets like Bitcoin. Conversely, when M2 declines, Bitcoin and other speculative assets tend to experience corrections or consolidation.
Bitcoin and M2: A Delayed Correlation?
Historical data indicates that Bitcoin’s biggest bull markets have coincided with periods of strong M2 growth. The explosive crypto rally of 2021, for example, took place alongside a surge in global liquidity. Similarly, Bitcoin’s recovery in 2022 and 2023 closely followed an increase in M2 levels.
However, despite the recent rise in M2, Bitcoin’s price has yet to reflect a strong bullish response. Could the effect be delayed?
Research suggests that Bitcoin typically takes around 10 weeks to fully react to shifts in M2 growth. If this pattern holds true, we may be in the early stages of a new bullish cycle.
Additionally, not just the amount of liquidity, but its acceleration is key. Even if M2 expands, without a rapid increase in liquidity flows, the impact on speculative assets like Bitcoin remains limited. Right now, while M2 is growing, there’s no significant acceleration, potentially explaining why Bitcoin hasn’t surged—yet.
Is the End of Quantitative Tightening (QT) in Sight?
Another critical factor in play is the potential end of the Federal Reserve’s Quantitative Tightening (QT) policy. Since 2022, the Fed has been reducing its balance sheet, leading to a liquidity squeeze across financial markets.
Now, signs are emerging that this tightening cycle could be coming to an end:
✅ FOMC minutes reveal that policymakers may consider pausing QT due to macroeconomic uncertainty.
✅ The Fed’s balance sheet has already shrunk from $9 trillion in 2022 to $6.8 trillion, with further reductions expected to $6.4 trillion.
✅ Prediction markets (Polymarket) currently place a 100% probability that QT will end before April 30.
If QT is indeed halted, it could be a major catalyst for Bitcoin and other risk assets, as the liquidity squeeze would ease—potentially triggering a new wave of capital inflows into crypto.
Is a New Bitcoin Rally on the Horizon?
While the combination of M2 growth and a potential end to QT presents bullish indicators for Bitcoin, uncertainty still lingers.
The main missing ingredient is a rapid acceleration in liquidity. Historically, Bitcoin’s price moves with a lag, meaning a strong rally could still be on the way.
The next quarter will be crucial. If liquidity expansion picks up speed and QT officially ends, Bitcoin could see a major breakout. Until then, investors remain cautious, waiting for confirmation that the next leg up is truly underway.
