Bitcoin value and liquidity can be correlated. Even though no one can prove a causal relationship between money availability and the price of cryptocurrencies, there are a few connections that have persisted historically. The price of bitcoin and M2, the global money supply, to put it simply, seem to move hand in hand over the years, with a long-term correlation of 0.94 when considering the past decade (2013-2024). With growing uncertainty rising among investors, it can be helpful to understand this interaction when predicting trends.
Recently, macroeconomics and politics have also intensified this trend. Economic factors in the world’s largest economies, such as the increase in the public debt ceiling in the USA and speculation about possible interest rate cuts in Europe and China, could inject even more liquidity into the system, potentially driving another cryptocurrency rally, according to enthusiasts.
There is a lower correlation between the two in the short term, though. If we look closely, this relationship drops to 0.51 for a 12-month period and only 0.36 in six-month periods. This is because the intense market volatility and movements in the cryptocurrency microecosystem have altered the fluctuation.
The main explanation for this is the inherent fluctuations of the ecosystem and the idea that the financial market itself does not operate in a linear manner, dealing with delays, speculations, discrepancies, and inconsistencies. In the case of bitcoin, specific events in the crypto market, such as the collapse of the Terra/Luna project, can disrupt this correlation with global liquidity in the short term.
If we consider that this correlation is real, it is good news for bitcoin investors, since global liquidity continues to grow. Since the beginning of 2025, the M2 global of the 21 largest economies has risen from $102 trillion to $107 trillion, an increase of 3.8%. Since the effects of these changes typically take about 60 days to reflect in the price of the cryptocurrency, there is an expectation of recovery by the end of April.
The M2 Global, for reference, is an indicator that measures the total amount of money available in an economy, including money in circulation, such as banknotes and coins, as well as bank deposits and other liquid assets held by banks. This index helps economists analyze the amount of money available for spending or investing. The higher the M2, the more money is available in the economy, which can influence inflation and economic growth.
Some bitcoin enthusiasts argue that the relationship between M2 and bitcoin is not just a correlation but a matter of cause and effect. The logic behind this argument is that when there is more money available in the economy, investors tend to allocate more resources to risk assets, such as bitcoin and other crypto assets.
However, the scenario is not deterministic. Even in a favorable liquidity environment, bitcoin needs to avoid excessive overvaluation to sustain consistent gains. One of the main indicators to measure this volatility behavior is the MVRV Z-score, which compares the current price of bitcoin with the average acquisition price of investors. Whenever this index reaches high levels, bitcoin tends to face corrections, regardless of global liquidity conditions.
