Bitcoin (BTC) is trading approximately 48% below its October peak, even as global money supply reaches a new record. This creates a significant gap between the asset and global liquidity this cycle. Market analysts view liquidity as a leading indicator for risk assets, prompting questions about whether Bitcoin will maintain or break its long-standing pattern.
The global M2 money supply, a common measure of worldwide liquidity, recently hit a record of nearly $135 trillion, according to Alphractal. The S&P 500 has mirrored this expansion, trading near its own record highs. Historically, Bitcoin has followed this liquidity trend, typically with higher volatility and a longer delay. This relationship held through 2024 and into early 2025 before a divergence emerged.
Alphractal noted that “Since early 2025, BTC has diverged sharply: while M2 continued making new highs and SPX recovered to near-ATH, BTC has compressed.” This current divergence is the most pronounced in Alphractal’s dataset. Analysts propose two main interpretations for this gap.
One interpretation, the convergence reading, suggests that an asset trading significantly below liquidity levels typically closes this gap through price appreciation. This view implies that Bitcoin’s price will rise to align with the expanded liquidity, rather than liquidity shrinking to meet Bitcoin’s current valuation.
The second interpretation, the structural reading, considers the link between Bitcoin and liquidity as non-mechanical and potentially variable. Past divergences, such as those observed in 2018 and 2022, took between 6 to 18 months to resolve. This perspective also acknowledges that changes in Bitcoin’s holder base could weaken its correlation with broader liquidity measures.
Alphractal stated that “Which reading applies depends on whether the current divergence reflects a temporary dislocation or a structural shift in BTC’s correlation regime.” Analyst Martini Guy echoed this sentiment, observing an improving macro backdrop that Bitcoin has not yet reflected. He suggested that either Bitcoin will begin to close the gap, or its connection to liquidity will break in an unprecedented manner.
Bitcoin firmed toward $66,000 this week, with the asset trading at $65,831, up 0.27% over the past day. This movement occurred as a US-Iran deal reportedly boosted equities and other risk assets. While this bounce offers a stabilization signal, it does not confirm a broader trend reversal.
On-chain data supports this cautious assessment. Glassnode described the recent move from near $60,000 as a period of base-building rather than a confirmed reversal. The recovery is occurring amid low spot volume, indicating a fragile market environment.