Despite a new peak in global liquidity measured by the M2 monetary aggregate, the Bitcoin price has yet to trigger a real rally. There are several reasons for this lag.
First of all, from a technical analysis point of view, the underlying trend remains bullish above US$70,000
This is the dominant technical factor for the bitcoin price, and the current bullish cycle (the one linked to the spring 2024 halving) remains active as long as the BTC price holds above the all-time high of the previous cycle. A pullback chart hypothesis can be defended as long as the market preserves the major support of the $70K mark.
Chart showing Japanese candles in weekly bitcoin price data with logarithmic scale
Trade diplomacy needs to take over
The increase in M2 money supply worldwide has indeed created an environment conducive to the rise of risky assets such as Bitcoin. However, the current macroeconomic situation, marked by persistent trade tensions and a lack of visibility on economic policies, is holding back investors’ risk-taking. Until the major economic powers, notably the United States, China and the European Union, find stable commercial common ground, confidence will remain limited
Time lag between liquidity and financial markets (see Swissquote’s April 14 bitcoin analysis, which is linked to this analysis)
Historically, there is an 80 to 110-day lag between the expansion of global liquidity (M2) and its impact on risky assets such as Bitcoin or the S&P 500. The injection of new liquidity first irrigates the real economy before being passed on to the financial markets. This phenomenon explains why Bitcoin has not yet taken full advantage of the current rise in M2, and why a positive effect on BTC can be expected from May and June 2025 onwards.
The market needs to be reassured by the FED’s intentions
Federal Reserve (FED) policy plays a central role. A restrictive stance (rate hikes, balance sheet reduction) slows the flow of liquidity into risky assets, while a more accommodative policy would be a catalyst for Bitcoin’s recovery. The markets are therefore awaiting the resumption of the US federal funds rate cut. Incidentally, this would be a factor in accelerating the US M2, which plays a crucial role in calculating the global money supply.
What’s still missing for a Bitcoin rebound
– A lasting easing of trade tensions and better visibility on global growth.
– Clear signals of more flexible monetary policy from the major central banks, notably the FED.
– The time needed for excess liquidity to spill over into financial markets and trigger increased risk-taking by investors.
Conclusion
The record-breaking rise in global M2 liquidity is a structurally positive factor for Bitcoin, but its effect is lagging and remains conditioned by the macroeconomic and monetary context. If fundamentals improve this spring, a major bullish phase for Bitcoin could be underway in the coming weeks.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.