- Bitcoin’s price movements closely follow global M2 money supply trends, with analysts eyeing a potential rally as liquidity expands.
- ETF outflows and market volatility push Bitcoin below $90K, but analysts see M2 expansion as a long-term bullish signal.
Global M2 money supply growth has captured the attention of cryptocurrency analysts, with many pointing to its strong correlation with Bitcoin price movements. The year-on-year M2 expansion rate for the four largest central banks reached 3.65% in January, suggesting increased liquidity in financial markets.
Analysts argue that past trends indicate Bitcoin follows M2 money supply growth 83% of the time, fueling speculation of a potential price rally. However, some experts caution against overconfidence, noting market volatility and external factors could still impact BTC’s price trajectory.
M2 Growth and Bitcoin’s Historical Correlation
Economists and market analysts have long studied the relationship between monetary expansion and cryptocurrency price action. According to economist Lyn Alden, Bitcoin historically moves in sync with global M2 liquidity trends. Pav Hundal, lead analyst at Swyftx, echoed this sentiment, stating, “Global loosening measures are a reliable lead indicator for crypto markets.” He emphasized that spot buyers are currently active, while the U.S. recently raised its debt ceiling by $4 trillion, adding more liquidity to the financial system.
Other analysts have pointed out how a weakening U.S. dollar has contributed to rising global M2 figures, potentially benefiting Bitcoin. Crypto researcher bitcoindata21 stated in a recent post that “with dollar weakness boosting Global M2, it’s only a matter of time before Bitcoin reacts.” Meanwhile, investment research firm Bravo Research highlighted that the U.S. money supply has doubled in just a decade, arguing that this liquidity surge could trigger Bitcoin’s next parabolic rally.
Volatility and ETF Sell-Offs Create Short-Term Pressure
Despite optimism surrounding M2 expansion, Bitcoin has faced near-term volatility, dropping below $90,000 after former U.S. President Donald Trump reaffirmed his commitment to tariffs on Canada and Mexico. Bitcoin is currently trading at $93,775, down 13.3% from its all-time high of $108,786 in late 2024. This decline coincides with ETF outflows, as $517 million exited U.S. Bitcoin ETFs on February 24, marking the highest single-day withdrawal in seven weeks, according to CoinGlass data.
Arthur Hayes, co-founder of BitMEX, warned that Bitcoin could fall to $70,000 if hedge funds unwind their spot ETF positions tied to futures arbitrage strategies. Hayes explained that institutional investors, particularly those holding BlackRock’s iShares Bitcoin Trust (IBIT), may start exiting positions as profit margins shrink. If large-scale fund withdrawals continue, ETF providers may be forced to liquidate Bitcoin holdings, amplifying selling pressure.
Market Outlook: Strong March or Further Corrections?
While short-term corrections have raised concerns, analysts remain divided on Bitcoin’s long-term trajectory. Swyftx’s Pav Hundal urged investors to be cautious, stating, “This isn’t a market to bet everything on a quick correction, but we still see a strong March ahead.” Similarly, crypto analyst Colin Talks Crypto noted that the Global M2 Money Supply indicates a major move is coming for BTC, but the timing remains uncertain.
According to the Ethnews recent post, macro investor Raoul Pal compared Bitcoin’s current price cycle to 2017, highlighting five major pullbacks this year—each lasting two to three months before Bitcoin hit new highs. He emphasized that altcoins have faced corrections of up to 65%, mirroring past cycles.
With Bitcoin’s Fear & Greed Index dropping to 25, signaling “Extreme Fear,” traders remain cautious as they weigh M2 expansion-driven optimism against short-term risks from ETF outflows and macroeconomic uncertainties. Investors are closely monitoring whether liquidity growth will be enough to push Bitcoin back toward $100,000 and beyond in the coming months.
