"The relationship between Global Liquidity, particularly M2 money supply, and Bitcoin's price is hard to ignore. When liquidity expands, Bitcoin tends to rally; when it contracts, Bitcoin struggles. Measured across this current cycle, the correlation stands at an impressive 88.44%. Adding a 70-day offset pushes that correlation even higher to 91.23%, meaning liquidity changes often precede Bitcoin's moves by just over two months."
"Still, there has been a notable divergence recently. Liquidity continues to rise, signaling support for higher Bitcoin prices, yet Bitcoin itself has stalled after making new all-time highs. This divergence is worth monitoring, but it doesn't invalidate the broader relationship. In fact, it may suggest that Bitcoin is simply lagging behind liquidity conditions, as it has done at other points in the cycle."
Global Liquidity, especially M2 money supply, exhibits a very strong correlation with Bitcoin price movements, often preceding those moves by roughly 70 days. The measured correlation for the current cycle is exceptionally high, indicating liquidity expansion tends to support rallies while contraction coincides with declines. A recent divergence shows liquidity rising while Bitcoin stalls, which may reflect Bitcoin lagging macro conditions rather than a breakdown of the relationship. Stablecoin supply offers a more direct gauge of capital ready to enter digital assets, with large stablecoin minting signaling potential inflows into Bitcoin. Combined metrics help distinguish a short pause from extended consolidation.
Read at Bitcoin Magazine
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