How does global liquidity influence Bitcoin trends?
Global liquidity (represented by M2 money supply) significantly impacts Bitcoin prices. When M2 expands, capital flows into high-yield assets like Bitcoin, driving up prices. When M2 contracts, risk assets come under pressure, making Bitcoin susceptible to pullbacks. The key point is that the year-on-year change rate of M2 reveals trends better than the absolute value, and Bitcoin prices typically lag behind liquidity changes by about 2 months (56-60 days).
Historical data shows that Bitcoin bull markets are often accompanied by rapid liquidity expansion, while contraction tends to precede price fluctuations. At the beginning of 2025, M2 growth is stable, and Bitcoin is consolidating around $80,000. Recently, liquidity has rebounded, which may drive a new round of increases by the end of March. If the lag effect holds, more significant price increases could be seen in early May.
Conclusion: Focusing on the rate of change of M2 rather than static data, combined with the lag effect, can more accurately predict Bitcoin trends. If liquidity continues to accelerate, Bitcoin is expected to experience a significant market movement.
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