Bitcoin (BTC) has decoupled from the M2 global liquidity supply, with its price struggling to hold above $100,000 in November, down approximately 21% from its recent peak of $126,000. This divergence began in July when the U.S. government's debt ceiling increase led to net dollar liquidity withdrawal, temporarily disrupting BTC's historical correlation with M2 growth.
Analyst Jesse Eckel emphasized that year-over-year (YoY) liquidity momentum, rather than the total M2 supply, is the key driver for crypto rallies. He noted that limited YoY liquidity in 2025 contrasts with the massive growth in 2017 and 2021, which fueled previous bull markets. Eckel predicts a resurgence in correlation once tradable liquidity increases, potentially in 2026.
Prominent figures like BitMEX Founder Arthur Hayes and Fundstrat's Tom Lee align with the view that October's $20 billion deleveraging event was a necessary market reset, not a cycle top. Coinbase analysts echoed this, describing the sell-off as a healthy flush that could pave the way for gradual gains. Options data indicates institutional positioning for a BTC range of $90,000 to $160,000 over the next three to six months.
Further analysis from CryptoRover highlights that altcoins are even more sensitive to liquidity shifts due to their speculative nature. Historical data shows crypto bull markets lag M2 growth spikes by 6–12 months, with a recovery contingent on central bank policy easing. Current subdued YoY M2 growth of 2–6% explains the stagnant prices, but a rebound above 8–10% could propel Bitcoin beyond $100,000 and ignite altcoin rallies.
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