Bitcoin’s long-standing relationship with global liquidity is showing visible strain. Throughout 2025, the familiar narrative that expanding money supply naturally lifts BTC prices has weakened, as fresh liquidity increasingly flowed into equities and precious metals rather than digital assets.
Despite a meaningful expansion in global M2 money supply, Bitcoin struggled to sustain upside momentum. After peaking near $126,000 in October, the leading cryptocurrency slipped into a lower trading range and has since failed to reclaim key psychological levels, reflecting a market environment driven more by caution than excess liquidity.
Key takeaways
Bitcoin decoupled from global M2 money supply growth during 2025.
BTC underperformed most traditional assets over the past 12 months.
Liquidity favored stocks and precious metals instead of crypto.
ETF flows and institutional behavior suggest persistent distribution near local highs.
Liquidity Expanded, Bitcoin Lagged
Over the past year, global M2 money supply climbed from roughly $104 trillion to more than $115 trillion, outpacing the pace seen in 2024 and resembling post-pandemic expansion trends. The U.S. alone saw M2 grow from $21.4 trillion in late 2024 to around $22.5 trillion by October 2025.
Historically, Bitcoin has tended to rally three to six months after such monetary expansion. This cycle, however, the relationship broke down. BTC posted only marginal net gains over the last 12 months, significantly lagging the performance of equities, artificial intelligence-linked stocks, and gold, all of which absorbed much of the excess liquidity.
China’s money supply expanded even faster — by roughly 8%, from 311 trillion to 336 trillion yuan — yet this growth did not translate into increased demand for Bitcoin. Asian trading activity remained restrained, reinforcing the idea that liquidity alone is no longer sufficient to drive aggressive crypto rallies.
ETF Flows Reflect Market Hesitation
On the institutional side, ETF data paints a similar picture. Bitcoin exchange-traded products experienced uneven flows throughout December, with several days of notable outflows offsetting brief inflow spikes. The pattern suggests investors were actively trimming exposure rather than building long-term positions.
At the same time, Bitcoin struggled to hold above $90,000, repeatedly facing selling pressure on every attempt to reclaim higher levels. Market capitalization hovered around $1.74 trillion, but momentum remained muted as trading activity reflected distribution rather than accumulation.
The combination of ETF outflows and persistent resistance indicates that institutional participants are increasingly selective, opting to reduce risk during rallies rather than chase upside.
Why the M2 Narrative Faltered
Unlike earlier cycles, Bitcoin entered 2025 as a far more mature and widely held asset. With a longer price history and deeper institutional participation, capital deployment became more deliberate. Rather than flowing automatically into BTC, excess liquidity rotated toward sectors with clearer near-term earnings visibility, such as artificial intelligence, infrastructure, and commodities.
This shift marked a departure from the reflexive “liquidity equals crypto rally” dynamic. Buyers remained present, but accumulation was measured and strategic, while sellers consistently emerged near local highs.
Can Bitcoin Catch Up?
Some analysts still argue that Bitcoin may eventually realign with global liquidity trends. A delayed catch-up rally could, in theory, push prices substantially higher, with long-term projections extending well above $200,000 per coin if sentiment reverses decisively.
For now, however, Bitcoin remains locked in a prolonged consolidation phase. Institutional selling, cautious retail participation, and weak follow-through on rallies suggest that any meaningful recovery may take months rather than weeks. Until broader sentiment improves and sustained inflows return, BTC appears set to remain range-bound — even as global money supply continues to grow.
In short, 2025 has challenged one of Bitcoin’s most reliable macro narratives, forcing markets to reassess whether liquidity alone is still enough to drive the next major leg higher.
