Global M2 supply is a crucial metric that measures the total amount of money available for spending and investment in the world’s major economies. An increase in M2 levels indicates a higher availability of funds, while a decrease suggests a reduction in liquidity within the markets. Currently, the global M2 supply is growing at a rapid rate of 8.77% year-over-year, which has significant implications, particularly for Bitcoin.
The expansion of global M2 supply signifies a rise in the total money circulating through the global economy, including cash, checking deposits, savings, and other near-money assets. This growth is often a result of central banks injecting liquidity into the system to stimulate economic growth or manage debt. Historically, such liquidity injections have been bullish for Bitcoin.
The correlation between M2 growth and Bitcoin is noteworthy. As central banks increase liquidity, real yields tend to decrease or even turn negative, making non-yielding assets like Bitcoin more appealing to investors. Additionally, Bitcoin’s scarcity, with a fixed supply cap of 21 million coins, sets it apart from fiat currencies that experience monetary inflation. In a scenario where fiat currencies are expanding at nearly 9% annually, Bitcoin’s scarcity becomes a valuable feature.
Looking back at previous market cycles, Bitcoin has experienced its strongest bull markets during periods of aggressive M2 expansion. For example, in 2020-21, post-COVID quantitative easing led to a significant increase in M2 growth, driving the price of Bitcoin up by 8x. Conversely, in 2022, when M2 growth slowed and the Federal Reserve tightened monetary policy, Bitcoin’s price corrected by nearly 75%. Now, in 2024-25, with M2 growth once again nearing 9%, the macroeconomic environment appears bullish for Bitcoin.
In terms of Bitcoin’s price outlook for 2025, the cryptocurrency recently consolidated around the key support level of $106.6K before attempting to break above $108K. Despite facing bearish pressure, Bitcoin managed to hold above support, indicating a potential bullish continuation. Technical indicators suggest that the price is hovering near its highs above $111K, with the potential for a new all-time high if it successfully breaks out of the consolidation range. However, failure to do so could result in a horizontal consolidation period.
Overall, the current expansion of global M2 supply and its correlation with Bitcoin’s price dynamics point towards a potentially bullish outlook for the cryptocurrency in 2025. Investors and traders should closely monitor M2 growth and its impact on Bitcoin’s performance in the coming months.