Simply put
- Bitcoin has notably diverged from the global M2 money supply growth, with some models indicating a fair value around $136,000, while it’s currently trading near $70,000.
- Analysts indicate that, even though the money supply is increasing, the stringent monetary policy in the United States is restricting how much liquidity can flow into riskier assets.
- Rising gas prices might diminish the impact of large tax refunds, leaving consumers with less disposable income to invest in common stocks and cryptocurrencies.
Bitcoin is currently trading at a significant discount compared to global liquidity trends. Macro challenges—like energy prices and monetary policy—complicate the future outlook for both risk assets and economic growth, as analyzed by CF Benchmarks.
According to the Kraken-owned index provider, the global M2 money supply has surged by around 12% since mid-2025, while Bitcoin has experienced a 35% drop over the same timeframe.
One model referenced in a report suggests that Bitcoin’s “fair value” is approximately $136,000, starkly contrasted with its near $70,000 price tag right now.
This steep divergence creates one of the most significant gaps historically between Bitcoin and the index often seen as a barometer for global liquidity. Generally, when the money supply grows, it positively affects risk assets, and Bitcoin has tended to react more dramatically than stocks.
“The key takeaway from over a decade of data is that historically, the divergence between M2 and Bitcoin has been temporary,” said Gabe Selby, the head of research at CF Benchmarks.
Analysts figure that U.S. monetary policy is the missing piece here. The Federal Reserve has cut its balance sheet down to about $6.7 trillion, significantly lower than the nearly $9 trillion high back in 2022. Despite increased liquidity, financial conditions remain tight due to elevated interest rates.
This situation is limiting capital inflows into the market, making Bitcoin increasingly reliant on real interest rates and broader risk sentiment rather than just money supply growth.
Elephant in the room
Meanwhile, rising energy prices are squeezing household budgets.
Researchers estimate that an increase of 81 cents in U.S. gas prices since late February could add approximately $740 to annual household expenses, which might offset much of the gains expected from higher tax refunds.
In January, the White House announced anticipated tax refunds to increase by about $1,000 for Americans, citing President Trump’s Working Families Tax Cuts Act, setting higher expectations for this winter.
Markets are also concerned about disruptions in the Strait of Hormuz, a vital route for global oil, which links to inflation risks.
Recent weeks have seen rising interest rates coupled with increasing oil prices driven by ongoing tensions between the U.S. and Iran. Oil even hit $100 per barrel before settling back down to around $92.
This comes as the Federal Reserve continues its cautious approach, opting to keep interest rates steady amid rising energy prices and their lingering effects on inflation and the cooling labor market.
The target range for federal funds rates remains at 3.50% to 3.75%, a pause that began in January following a series of rate cuts late last year.
This combination might dissuade discretionary spending, ultimately limiting the funds available for investment in riskier assets like cryptocurrencies and growth stocks if high prices persist.
Nevertheless, many experts argue that once financial conditions improve and conflicts in the Middle East are managed, global growth could resume, potentially offering a significant boost for cryptocurrencies.
Past trends indicate that Bitcoin typically aligns with multi-quarter liquidity shifts, especially if the Fed takes steps to cut interest rates or slows its balance sheet reductions.
So, the lingering question remains—when will that happen?
Inflation has continued its upward trajectory since the post-pandemic stimulus from the Biden administration, wreaking havoc on the prices of goods and services. Central banks aim to reduce benchmark interest rates to encourage growth amidst persistent inflation, foreign conflicts, and tightening monetary policies which currently create uncertainty about risk asset trajectories. Cryptocurrencies, often moving in sync with the Nasdaq, are still in a precarious position.
“The increased demand through traditional financial instruments that drove Bitcoin to its all-time highs, like U.S.-listed spot Bitcoin ETFs and corporate treasuries, will offer direct mechanical support for a potential trend reversal,” Selby noted.
“Ongoing purchases from these groups represent a form of structural demand that wasn’t present in earlier cycles,” he added.
