Global liquidity, marked by aspects like the Global M2 supply, is crucial in assessing macroeconomic conditions and forecasting Bitcoin's price. The M2 supply includes all currency and near-money assets, serving as a gauge for fiscal stimulus. Historically, increases in M2 have coincided with Bitcoin price surges, particularly seen in the bull runs of 2016-2017 and 2020. Analyzing the year-on-year growth rate of M2 offers a clearer indicator, revealing a direct correlation between rising M2 rates and Bitcoin rallies, as opposed to M2 levels alone, which can be misleading due to their generally upward trend.
Historically, major expansions in M2, especially those driven by money printing and fiscal interventions, have coincided with explosive Bitcoin rallies. The 2020 bull run was a textbook example.
When the year-over-year growth rate of M2 is rising, Bitcoin tends to rally. When it's falling or negative, Bitcoin typically struggles. This trend highlights the deep connection between fiat liquidity expansion and Bitcoin's bullishness.
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