$108T Flood Ignites Curiosity: Why Isn’t Bitcoin Soaring to New Heights?

Global Liquidity Soars, But Why Isn’t Bitcoin Following?

Global M2 money supply has hit an all-time high, yet Bitcoin isn’t surging. What’s going on?

Markets are on edge as the Federal Reserve’s March 18-19 meeting approaches.Economic conditions are volatile, with stock markets faltering and inflation persisting. Investors are rethinking their expectations for interest rate cuts.

President Trump’s tariff policies and federal layoffs add to the uncertainty. The federal Open Market Committee is expected to keep rates unchanged at 4.25-4.5%.However, the timing of the first rate cut is the real focus. A potential reduction in June is projected, with rates possibly moving to 4-4.25%.

Investors anticipate a cumulative reduction of three-quarters of a percentage point in 2025, bringing the Fed’s benchmark rate down to 3.5-3.75%. The S&P 500 has dropped over 8% from its February high, while the Nasdaq fell 4% on March 10.

Bitcoin is also struggling, trading around $82,300 as of March 18, down nearly 25% from its January high. The question is: What’s next for markets and crypto?

Global liquidity is surging,with M2 money supply reaching $108.2 trillion as of march 10. M2 includes cash, checking deposits, and near-money assets. When M2 expands, liquidity typically flows into high-yielding investments like Bitcoin.

Historically, Bitcoin has a strong correlation with M2 growth. However, Bitcoin doesn’t react immediately. research suggests an average lag of about 10 weeks before Bitcoin reflects changes in M2 growth.

Keep an eye on global liquidity changes. It’s a crucial long-term factor driving bitcoin. A deeper analysis of Bitcoin’s relationship with M2 could reveal more insights.

Fed’s QT Program May Soon end,Impacting Bitcoin and Markets

The Federal Reserve’s quantitative tightening (QT) program,which began in June 2022,might be nearing its conclusion.

As of March 18, traders on polymarket have wagered over $6.2 million, assigning a 100% probability that QT will end by April 30. QT involves the Fed allowing assets to mature off its balance sheet, effectively removing money from circulation. this policy,along with rate hikes,has helped curb inflation but also created liquidity constraints.

However, the minutes from the January FOMC meeting suggest that policymakers are considering slowing or pausing QT due to economic uncertainties. Analysts note that Treasury Department measures have been injecting temporary liquidity, complicating the Fed’s assessment of reserve levels. this could lead to increased market volatility if too much liquidity is withdrawn too quickly.

While some analysts like barclays predict QT will end between September and October, others believe the Fed may slow the pace of asset runoffs instead of halting them entirely. A full stop could create communication challenges for policymakers, especially if market conditions remain fragile.

Historically, unwinding QT has been a delicate process. If the Fed signals a stop in the coming months, it could mark the end of the program. This could lead to lower long-term interest rates, a weaker dollar, and increased demand for risk assets like Bitcoin and equities.

However, rising M2 money supply, a strong precursor to Bitcoin bull runs, doesn’t guarantee immediate price action. on-chain metrics and institutional developments suggest that Bitcoin’s short-term outlook may not align with this trend just yet. Ki Young Ju, CEO of CryptoQuant, warns that “every on-chain metric signals a bear market,” indicating fresh liquidity drying up and new whales offloading BTC at lower prices.

One key metric is MVRV (Market Value to Realized Value), which compares Bitcoin’s market value to the price at which coins last moved. This helps determine if BTC is overvalued or undervalued. Despite global M2 reaching a record high, Bitcoin’s price action has shown signs of exhaustion.

Bitcoin Faces Consolidation Phase and Institutional Challenges

Key metrics suggest Bitcoin may enter a 6-12 month consolidation period.SOPR and NUPL indicators show holders might be selling at a profit or loss. This phase often follows major bull runs.

Bitcoin’s price reaction to rising liquidity could be delayed. Historically, liquidity expansions took months to boost prices. Meanwhile, institutional headwinds grow. The U.S. adopted a Bitcoin Strategic Reserve, signaling a shift in government views. However, global financial institutions are not pleased.

Max Keiser, a Bitcoin advocate, notes the IMF and credit rating agencies are lowering the U.S. credit rating due to Bitcoin’s “destabilizing influence.” the IMF recommends liquidating the U.S. Bitcoin Strategic Reserve. If the U.S. sells its reserves, it could cause short-term downward pressure. Investors should stay cautious.

Bitcoin may enter a 6-12 month consolidation phase, as seen after major bull runs. Key metrics like SOPR and NUPL suggest this pattern.

However, institutional challenges loom.The U.S.adopted a Bitcoin Strategic Reserve, but global financial institutions are not pleased. Max keiser, a Bitcoin advocate, notes the IMF and credit rating agencies are lowering the U.S. credit rating due to Bitcoin’s “destabilizing influence.”

Keiser adds the IMF recommends liquidating the Bitcoin Strategic Reserve. If the U.S. sells its reserves, it could cause short-term downward pressure on Bitcoin.

Investors should stay cautious and monitor liquidity trends and government actions. Bitcoin’s next major move may require patience. Max Keiser advises trading wisely and not investing more than you can afford to lose.