Divergence raises questions about money supply correlation
Global M2 liquidity crossed a record $135 trillion on June 16, yet Bitcoin remains significantly below its October 2025 peak, trading near the mid-$60,000 area. The gap between money supply expansion and Bitcoin’s price performance marks a departure from historical patterns that have typically aligned BTC with broader liquidity cycles.
Bitcoin has historically moved in tandem with global money supply across prior market cycles. When central banks expand money supply, risk appetite typically improves and asset prices rise accordingly. The current divergence has created a macro puzzle for traders: whether Bitcoin is simply lagging and will eventually catch up, or whether the relationship between liquidity and BTC price has fundamentally shifted.
Two competing interpretations have emerged. The “catch-up rally” thesis holds that Bitcoin remains undervalued relative to the unprecedented liquidity environment and will eventually surge as capital rotates into higher-beta assets. Proponents of this view see the divergence as temporary, a lag that resolves once market sentiment shifts.
The alternative “regime-change” argument contends that Bitcoin’s market structure has fundamentally altered. Spot exchange-traded funds, institutional capital flows, a stronger dollar, and rotation into artificial intelligence equities may be dampening how Bitcoin responds to liquidity expansion. Under this interpretation, the old relationship between money supply and BTC price is no longer as direct as it once was.
The $135 trillion M2 milestone represents the largest money supply expansion on record, yet Bitcoin trades far below levels seen in October 2025. This disconnect contradicts the assumption that risk appetite and asset prices improve automatically when money supply expands. Past correlation between money supply and Bitcoin price is not a guarantee of future performance, leaving traders uncertain which thesis will prove correct.
The divergence has become a central question in macro-focused Bitcoin analysis. Traders monitoring the relationship face a critical decision: whether to position for a delayed catch-up or to assume the liquidity-to-BTC mechanism has broken down structurally. The answer will likely determine positioning and risk management strategies across the second half of 2026.
