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<p class="is-style-lead">Global M2 money supply is at an all-time high — so why isn’t Bitcoin surging? Is something broken, or is a delayed breakout coming?</p> 
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 <p>Table of Contents</p>
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  <ul>
   <li><a href="#markets-on-edge-as-the-fed-meeting-looms">Markets on edge as the Fed meeting looms</a></li>
   <li><a href="#rising-m-2-liquidity">Rising M2 liquidity</a></li>
   <li><a href="#quantitative-tightening-could-be-nearing-its-end">Quantitative tightening could be nearing its end</a></li>
   <li><a href="#liquidity-surge-meets-institutional-uncertainty">Liquidity surge meets institutional uncertainty</a></li>
  </ul>
 </nav>
</div> 
<h2 class="wp-block-heading" id="markets-on-edge-as-the-fed-meeting-looms">Markets on edge as the Fed meeting looms</h2> 
<p>Markets are heading into the <a href="https://crypto.news/tag/federal-reserve/">Federal Reserve</a>’s Mar. 18-19 meeting with mounting uncertainty as economic conditions remain volatile. Stock markets have stumbled, <a href="https://crypto.news/tag/inflation/">inflation</a> remains persistent, and investors are reassessing their expectations for interest rate cuts.</p> 
<p>Adding to the unpredictability, President Trump’s tariff policies and federal layoffs have raised fresh concerns about the broader economic outlook, injecting further instability into an already fragile market.</p> 
<p>Despite the turbulence, the Federal Open Market Committee is widely expected to keep interest rates unchanged at 4.25-4.5%, with CME Group’s FedWatch tool <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank" rel="nofollow">assigning</a> a 99% probability to no immediate adjustments.</p> 
<p>However, the real focus is on the timing of the first rate cut. Current projections suggest a potential reduction in June, with a 55% <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html" target="_blank" rel="nofollow">chance</a> that rates will move to 4-4.25%.&nbsp;</p> 
<p>Overall, investors anticipate a cumulative reduction of three-quarters of a percentage point in 2025, which could bring the Fed’s benchmark rate down to 3.5-3.75%.</p> 
<p>Amid this uncertainty, financial markets have responded sharply. The S&amp;P 500 has dropped more than 8% from its Feb. 19 all-time high, while the Nasdaq plunged 4% on Mar. 10 — its worst trading day since 2022.&nbsp;</p> 
<p>Meanwhile, the volatility index has surged to its highest level since August, reflecting the difficulty investors face in maneuvering shifting policies, particularly Trump’s tariff hikes.</p> 
<p>Bitcoin (<a href="https://crypto.news/price/bitcoin/">BTC</a>) has also struggled to find its footing, remaining range-bound around $82,300 as of Mar. 18 — down nearly 25% from its all-time high of $109,114 in January.</p> 
<figure class="wp-block-image">
 <img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeS6k4uFJeVk9S3n2iKLg07X0tPznfb0O1y5NHhLHcJvtA0Wy9nuqckkWaMTFeW7clN7zQ5Oz9z9pMZKM7hmgkiFIvYNo4aKYe8r65DTDKqbMnptE_YBCpa0lvXBCH_Q1A9TWcy?key=39LQVaTNREGJavF7tCYiqfaH" alt="A $108T global liquidity surge should be sending Bitcoin to the moon — So why isn’t it? - 12">
 <figcaption class="wp-element-caption">
  BTC price chart | Source: <a href="https://crypto.news/price/bitcoin/">crypto.news</a>
 </figcaption>
</figure> 
<p>The question now is: What comes next? How will markets react if the Fed signals a shift in policy? And what does all of this mean for crypto in the coming weeks?</p> 
<h2 class="wp-block-heading" id="rising-m-2-liquidity">Rising M2 liquidity</h2> 
<p>Global liquidity is surging, and history suggests that risk assets like Bitcoin may soon react. As of Mar. 10, global M2 money supply reached an all-time high of $108.2 trillion, marking a 3.5% increase from its 2025 low of $104.5 trillion recorded on Jan. 6.</p> 
<figure class="wp-block-image">
 <img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXefxfMacNV1l8_R2Tn3Jfjvg8jm5DHkJB1FLptZZJxgCgiSNIIRHfBFmccor0qZjSNuU2JhLKlP9qgalw4wC0FON072t2TD9AosZChx5lf22tFmrN-qWw-pGBMYZME7IZDuuU6i?key=39LQVaTNREGJavF7tCYiqfaH" alt="A $108T global liquidity surge should be sending Bitcoin to the moon — So why isn’t it? - 13">
 <figcaption class="wp-element-caption">
  Bitcoin and global M2 growth chart | Source: <a href="https://charts.bgeometrics.com/m2_global.html" target="_blank" rel="nofollow">BGeometrics</a>
 </figcaption>
</figure> 
<p>Yet, in this cycle, Bitcoin’s price action has shown inconsistencies despite the rise in liquidity, raising questions about whether a delayed response is at play.</p> 
<p>M2 money supply serves as a broad measure of global liquidity, encompassing cash, checking deposits, and easily convertible near-money assets.</p> 
<p>When M2 expands, liquidity typically finds its way into high-yielding investments, leading to rallies in stocks, commodities, and Bitcoin. Conversely, contractions in M2 often coincide with risk-off periods, where assets struggle to find upside momentum.</p> 
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  <blockquote class="twitter-tweet" data-width="550" data-dnt="true">
   <p lang="en" dir="ltr">Keep an eye on changes in global liquidity – it's one of the most important long term factors driving Bitcoin.<br><br>In fact, using data from 2013 to 2024, BTC has a 94% correlation with global M2. <br><br>Now you know why so many people are begging for an end to QT &amp; even a return of QE. <a rel="nofollow" href="https://t.co/E27bkhS5Vx" target="_blank">pic.twitter.com/E27bkhS5Vx</a></p>— Nic (@nicrypto) <a href="https://twitter.com/nicrypto/status/1897340251103989790?ref_src=twsrc%5Etfw" target="_blank" rel="nofollow">March 5, 2025</a>
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<p>A closer look at historical data highlights Bitcoin’s strong correlation with M2 growth. Bitcoin’s most significant bull runs have occurred during periods of rapid liquidity expansion, whereas downturns in M2 have preceded price declines or prolonged consolidations.</p> 
<p>However, a key observation is that Bitcoin does not react immediately to liquidity surges. Research suggests an average lag of approximately 10 weeks before Bitcoin fully reflects changes in M2 growth.</p> 
<p>The above M2 chart further supports this narrative. Bitcoin’s recovery from its 2022-2023 lows coincided with a significant uptick in M2 growth. Similarly, in mid-2024, a renewed expansion in M2 was followed by Bitcoin reaching new highs.</p> 
<p>However, in early 2025, Bitcoin entered a period of consolidation despite M2 continuing its ascent. The missing ingredient appears to be the rate of change in liquidity rather than its absolute level.</p> 
<p>A deeper analysis of Bitcoin’s year-on-year returns relative to the YoY change in M2 reveals a clearer pattern — Bitcoin’s strongest bull runs tend to emerge when liquidity growth accelerates rapidly rather than when it remains steady.</p> 
<p>Hence, mere liquidity expansion isn’t enough to trigger a breakout — acceleration in M2 growth is the critical factor.</p> 
<h2 class="wp-block-heading" id="quantitative-tightening-could-be-nearing-its-end">Quantitative tightening could be nearing its end</h2> 
<p>The Federal Reserve’s quantitative tightening (QT) program, which has been <a href="https://www.cmegroup.com/openmarkets/interest-rates/2024/How-the-Fed-Uses-Quantitative-Tightening-to-Address-Inflation.html#" target="_blank" rel="nofollow">running</a> since June 2022, may be approaching its final stretch.</p> 
<p>As of Mar. 18, over $6.2 million has been <a href="https://polymarket.com/event/will-fed-end-qt-before-may?tid=1742302379607" target="_blank" rel="nofollow">wagered</a> on <a href="https://crypto.news/what-is-polymarket/">Polymarket</a>, with traders assigning a 100% probability that the Fed will end QT by Apr. 30.</p> 
<p>At its core, QT is the opposite of quantitative easing (QE). Instead of injecting liquidity into the system by purchasing bonds, the Fed has been allowing assets to mature off its balance sheet, effectively pulling money out of circulation.</p> 
<p>This policy, alongside aggressive rate hikes, helped curb inflationary pressures but also created liquidity constraints that have weighed on markets. While stocks and crypto assets managed to rally despite QT’s tightening effects, concerns have emerged that continued balance sheet reduction could drain liquidity at a time of rising economic uncertainty.</p> 
<p>The minutes from the January FOMC meeting revealed that several policymakers were open to either slowing or pausing QT, largely due to uncertainties surrounding the federal debt ceiling and evolving money market conditions, Reuters <a href="https://www.reuters.com/markets/us/feds-quantitative-tightening-expectations-upended-by-debt-ceiling-worries-2025-02-26/" target="_blank" rel="nofollow">reported</a>.</p> 
<p>Analysts note that the Treasury Department’s extraordinary measures to keep government operations funded have been injecting temporary liquidity into the system.&nbsp;</p> 
<p>This has made it harder for the Fed to accurately assess true reserve levels, creating a risk that it could withdraw too much liquidity too quickly, increasing financial market volatility.</p> 
<p>Despite rising expectations of a near-term end to QT, not all analysts agree on the timing.</p> 
<p>Barclays maintains its projection that QT will conclude between September and October, arguing that pausing in March or May only to restart reductions later would be inefficient.</p> 
<p>Meanwhile, Wrightson ICAP analysts believe the Fed is more likely to slow the pace of asset runoffs rather than halt them entirely, noting that a full stop could force the Fed to resume asset purchases later, creating communication challenges for policymakers.</p> 
<p>Others, like research firm LH Meyer, caution that any pause in QT could risk turning into a full stop, as resuming the process later could prove difficult — especially if market conditions remain fragile.</p> 
<p>The Fed’s ability to gauge the right stopping point has been complicated by mixed signals from liquidity indicators.</p> 
<p>A survey of major banks and money managers conducted before the last policy meeting suggested QT could conclude between June and July.</p> 
<p>Fed holdings, which have already declined to $6.8 trillion from a peak of $9 trillion in 2022, are expected to fall further to around $6.4 trillion by the end of the process.</p> 
<p>However, estimates suggest that bank reserves will only dip to $3.125 trillion from the current $3.3 trillion, while the Fed’s reverse repo facility — a measure of excess liquidity — has remained below $100 billion throughout February, indicating that financial conditions may already be tighter than intended.</p> 
<p>Historically, unwinding QT has been a delicate process, and if the Fed signals a stop in the coming months, it may effectively mark the end of the program.</p> 
<p>If that happens, the implications could be broad—lower long-term interest rates, a weaker dollar, and potentially increased demand for risk assets like Bitcoin and equities.</p> 
<h2 class="wp-block-heading" id="liquidity-surge-meets-institutional-uncertainty">Liquidity surge meets institutional uncertainty</h2> 
<p>While rising M2 money supply has been a strong precursor to Bitcoin bull runs, on-chain indicators and institutional developments suggest that the short-term outlook may not align with this trend just yet.</p> 
<p>Despite global M2 reaching a record high, Bitcoin’s price action has shown signs of exhaustion. Ki Young Ju, CEO of CryptoQuant, warns that “every on-chain metric signals a bear market,” pointing to fresh liquidity drying up and new whales offloading BTC at lower prices.</p> 
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
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   <p lang="en" dir="ltr"><a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw" target="_blank" rel="nofollow">#Bitcoin</a> bull cycle is over, expecting 6–12 months of bearish or sideways price action. <a rel="nofollow" href="https://t.co/f80bnNhjy4" target="_blank">pic.twitter.com/f80bnNhjy4</a></p>— Ki Young Ju (@ki_young_ju) <a href="https://twitter.com/ki_young_ju/status/1901776137715671191?ref_src=twsrc%5Etfw" target="_blank" rel="nofollow">March 17, 2025</a>
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<p>His analysis, which applies Principal Component Analysis (PCA) to various metrics, suggests that Bitcoin’s price may not immediately react to rising liquidity.</p> 
<p>One of the key metrics is MVRV (Market Value to Realized Value), which compares Bitcoin’s market value to the price at which coins last moved, helping to determine whether BTC is overvalued or undervalued.</p> 
<p>Another critical metric is SOPR (Spent Output Profit Ratio), which measures whether Bitcoin holders are selling at a profit or a loss.</p> 
<p>Additionally, NUPL (Net Unrealized Profit/Loss) tracks the overall profitability of Bitcoin holders based on unrealized gains and losses across the network.</p> 
<p>Based on these indicators, Bitcoin may be entering a 6–12 month consolidation phase — a pattern historically seen after major bull runs.&nbsp;</p> 
<p>If this holds true, Bitcoin’s reaction to rising liquidity could be delayed rather than immediate, mirroring previous cycles where liquidity expansions took months to translate into bullish price action.</p> 
<p>At the same time, institutional headwinds are mounting. The U.S. recently adopted a Bitcoin Strategic <a href="https://crypto.news/trump-crypto-strategic-reserve-bitcoin-shakeup/">Reserve</a>, marking a key shift in how the government views Bitcoin as an asset.</p> 
<p>However, this move has not been well received by global financial institutions. Max Keiser, a longtime Bitcoin advocate and senior Bitcoin advisor to <a href="https://crypto.news/el-salvador-imf-bitcoin-accumulation/">El Salvador</a>’s government, notes that the IMF and credit rating agencies have begun lowering the U.S. credit rating, citing Bitcoin’s “destabilizing influence.”</p> 
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  <blockquote class="twitter-tweet" data-width="550" data-dnt="true">
   <p lang="en" dir="ltr">The IMF (and various credit rating agencies) are lowering US credit rating citing the destabilizing influence of Bitcoin. They recommend the US to immediately liquidate their BSR (Bitcoin Strategic Reserve).</p>— Max Keiser (@maxkeiser) <a href="https://twitter.com/maxkeiser/status/1901699632666653141?ref_src=twsrc%5Etfw" target="_blank" rel="nofollow">March 17, 2025</a>
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<p>Keiser adds that the IMF is now recommending the immediate liquidation of the BSR, raising concerns about potential political pressure on the U.S. Bitcoin holdings.</p> 
<p>If the U.S. government begins selling its Bitcoin reserves under such pressures, it could introduce additional downward momentum, at least in the short term.</p> 
<p>Investors should remain cautious of near-term volatility while closely monitoring liquidity trends and government actions. Bitcoin’s movement in the coming months may require patience before the next major move takes shape.&nbsp;</p> 
<p>Trade wisely and never invest more than you can afford to lose.</p> 
<p> Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only. </p>

A $108T global liquidity surge should be sending Bitcoin to the moon — So why isn’t it?

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