The Bitcoin course can be analyzed in a variety of ways. One method is to track movements at the level of money supply. However, whether the growing money supply is always synonymous with the growing BTC valuation.
Money supply
The money supply is one of the key concepts that appear in economics – refers to the overall amount of money in the circulation in the economy at the moment. There are several categories of money supply. First, let’s see how the money supply aggregates differ from each other: from M0 to M3:
- M0 – base money, covering only cash in circulation and reserves of commercial banks at the central bank,
- M1 – contains cash (coins and banknotes) and deposits on demand (e.g. funds on current accounts),
- M2 – are M1 plus term deposits (deposits with a short maturity, usually up to 2 years) and other easily available funds that can be quickly converted into cash,
- M3 – an even wider aggregate, which includes M2 and larger term deposits, money market funds and other financial instruments.
M2 money supply is considered the so -called Intermediate aggregate – contains money that is very liquid (cash, current accounts), as well as those slightly less liquid (e.g. short -term bank deposits). M2 includes exactly:
- cash in circulation (banknotes and coins),
- Deposits on demand (e.g. current bills),
- term deposits with a short incidence period (up to 2 years),
- Deposits with a notice period up to 3 months.
Why is M2 important?
M2 is used by economists to analyze inflation, economic growth and, above all, monetary policy. Due to the fact that it includes both funds used for daily transactions and those that can be quickly “thrown” on the markets, M2 well reflects the amount of money really available in the economy.
Central banks pay attention to M2, because a rapid increase in money supply can lead to inflation. On the other hand, a decrease in m2 or too slow growth can signal recession or economic slowdown.
What does this have to do with Bitcoin?
Bitcoin was created as something that was to save his holder from the effects of inflation – was to be a healthy currency. Therefore, softening the American dollar by increasing its supply should strengthen BTC. And more broadly: the generally more money is in circulation, the better for the cryptocurrency. Anyway, for logic: the more money circulates around the world, the greater the likelihood that some will hit the market of digital assets.
And in fact, historically speaking, we saw that the price of Bitcoin follows the expansion of M2 – when fluidity increases, increases and the value of BTC. Only that is not always the case. For example, in this cycle we have observed a deviation: despite the almost constant increase in the global M2 supply, Bitcoin behaved … differently.
Look at a specific example: during the Bitcoin course consolidation phase at the beginning of 2025. The global supply m2 was constantly growing, it almost became a straight line, rushing up. It’s just that the Bitcoin course was “tugged”. Certainly it was not a period of “wild” bull market.
Delay of liquidity
The key observation is that global liquidity affects BTC valuation, but not immediately. A thorough analysis of both charts – liquidity and bitcoin – shows that cryptocurrency is growing in strength behind the liquidity course, but with a delay of about 10 weeks. In other words, shift the “Global Liquidity” indicator 10 weeks ahead significantly strengthens the correlation with Bitcoin.
And so, for example, through part of 2025, liquidity remained in the side trend. It happened after significant expansion at the end of 2024, which raised the Bitcoin course to new Maksim. Subsequent flattening of the liquidity line coincided with the consolidation of the Bitcoin course and even a decrease to around USD 80,000. However, if historical trends persist, a recent increase in liquidity should translate into another wave of BTC growth. We have actually seen the drawing of a new ATH, which, however, was poured with another correction, which we are still observing.
Or maybe it’s about something else?
It is worth noting, however, that this matter – connecting liquidity with a bitcoin course – does not have to be as unambiguous as experts want to see. Of course, again for logic, the greater liquidity, the greater the chance because more capital will affect the cryptocurrency market. Only that he must also have a condition for flow. For example, if in the world, at the level of macroeconomics or geopolitics, you can observe considerable threats that generate uncertainty, at the level of “capital routes” bumps are created. As a result, capital does not have to go to the Bitcoin market in the amount that the bulls dream about.
Actually, this year it is clearly seen: Donald Trump introduced uncertainty in February – all because of the customs war he spoke to the almost whole world. He suppressed the growths of BTC and the leading Altcoins. In addition, the Fed – also in fear of the further actions of the White House – ceased to lower interest rates. And this despite the decreases in inflation in the USA.
Currently, there are many indications that the customs war on the US -China line will end – both countries have reached an agreement in London and probably soon announced a new trade agreement. Following this, the US can also finish negotiations with subsequent countries. As a result, the FED will receive green light for foot cuts, and investors will start using excess liquidity to invest in assets such as cryptocurrencies. Until this time, however, “shifting” capital to the Bitcoin stock exchanges will be suppressed.
Summary
Monitoring global liquidity is an essential element of investing – the level of money supply M2 affects macroeconomics, and thus allows you to predict the trajectory of the Bitcoin course. However, it is worth understanding exactly how this process – influencing M2 on Bitcoin – works exactly. The point is that there is a delay in it.
In addition, Bitcoin needs not only fluidity to grow, but to the right geopolitical and macroeconomic conditions. The key is the atmosphere of certainty and peace in the markets, which this year was so far lacking. It is possible, however, that as China-Us’s new commercial agreement, peace will return to the markets, which is the foundation of assets.
