Historically, Bitcoin’s price has shown a strong correlation (often cited around 80-89%) with global M2 growth, particularly when liquidity increases due to central bank policies like rate cuts or quantitative easing. However, deviations occur, and recent analyses suggest such a divergence happened around June 2025.
Crypto analyst Colin noted in June 2025 that Bitcoin’s price deviated from global M2, similar to a divergence seen in February 2025, but emphasized this was short-term and didn’t break the broader correlation, which holds about 80% of the time.
These deviations often occur near cycle tops or during crypto-specific events (e.g., institutional buying or market corrections) and don’t negate the long-term trend where Bitcoin tends to rally with rising M2. For instance, global M2 hit $108.4 trillion in April 2025, and Bitcoin’s price surged to $104,000 by May, though it later corrected to around $80,000 before rebounding.
The largest deviation in the past two years likely stems from Q1 2024, when Bitcoin rose sharply due to spot ETF approvals and halving anticipation, despite muted M2 growth, leading to a temporary negative 30-day correlation. By April 2025, the correlation realigned at 0.67, with a 90-day lagged M2 increase of 2% corresponding to a 70% Bitcoin price surge.
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This suggests Bitcoin sometimes “front-runs” liquidity trends or reacts to crypto-specific catalysts not captured by M2 data. Continued M2 growth, especially outside the U.S. (e.g., China, India, Europe), and institutional accumulation via ETFs suggest Bitcoin’s price may realign with liquidity trends, potentially targeting $132,000-$170,000 by mid-2025, per analysts’ projections.
Bitcoin’s deviation from M2 suggests it’s increasingly driven by crypto-specific factors (e.g., ETF inflows, halving cycles, institutional adoption) rather than solely macroeconomic liquidity trends. This could mean Bitcoin is maturing as an asset class, less tethered to traditional monetary metrics.
When Bitcoin decouples from M2, its price can become more unpredictable, as seen in Q1 2024 with ETF-driven surges. Investors may face sharper corrections or rallies, requiring careful risk management. Large deviations often signal speculative fervor or market sentiment shifts, like retail FOMO or institutional accumulation.
For instance, June 2025’s divergence coincided with Bitcoin hitting $80,000 post-correction, hinting at sentiment-driven moves. If M2 growth slows (e.g., due to tighter monetary policy) but Bitcoin rallies, it could indicate a disconnect from broader economic conditions, potentially signaling overvaluation or a bubble.
Conversely, if M2 surges and Bitcoin lags, it may suggest underperformance or market hesitancy. Investors relying on M2 correlation for Bitcoin price predictions may need to incorporate additional indicators (e.g., on-chain data, ETF flows, or halving effects) during deviation periods to avoid misjudging market trends.
Despite short-term deviations, the 80-89% historical correlation with M2 suggests Bitcoin remains sensitive to global liquidity. Continued M2 growth (e.g., $108.4T in April 2025) could support Bitcoin’s long-term bullish outlook, with targets of $132,000-$170,000 by mid-2025.
Significant deviations might prompt regulators to scrutinize Bitcoin’s role in financial markets, especially if it moves independently of monetary policy tools like M2, potentially affecting future crypto regulations.
In summary, while deviations highlight Bitcoin’s evolving role and short-term volatility, its long-term tie to liquidity suggests these are temporary. Investors should monitor crypto-specific catalysts and global M2 trends for strategic positioning.