Bitcoin is experiencing a significant divergence from global M2 growth, with recent analysis indicating a fair value estimate of approximately $136,000, contrasting sharply with its current trading levels around $70,000. This gap reflects one of the most pronounced discrepancies recorded between Bitcoin and a metric often used as a proxy for global liquidity, according to a report from CF Benchmarks.
The global M2 money supply has increased by about 12% since mid-2025, while Bitcoin’s value has plummeted by roughly 35% in the same timeframe. Gabe Selby, Head of Research at CF Benchmarks, highlighted that divergences between M2 and Bitcoin levels have historically been temporary. However, he pointed to U.S. monetary policy as a critical factor limiting capital flows into risk assets like Bitcoin.
The Federal Reserve has notably reduced its balance sheet to approximately $6.7 trillion, down from a peak of nearly $9 trillion in 2022, while maintaining higher interest rates. This has created a tighter financial environment despite the growing liquidity observed elsewhere, thereby affecting Bitcoin’s correlation with real interest rates and overall risk sentiment, rather than merely money supply trends.
Moreover, rising energy costs present added challenges for household finances. Since late February, gasoline prices have surged by 81 cents, which is estimated to impact households by roughly $740 annually—potentially offsetting the anticipated increase in tax refunds projected by the White House. These refunds were expected to average around $1,000 due to tax reforms introduced during the Trump administration.
Market observers are also concerned about ongoing disruptions in the Strait of Hormuz, a critical global oil supply route, especially in light of rising inflationary pressures linked to these conflicts. Oil prices have fluctuated, recently exceeding $100 per barrel before dropping to around $92, amidst fears that these elevated prices, coupled with the Fed’s current interest rate strategy, may hinder discretionary spending. This may further restrict investment capital available for higher-risk assets such as cryptocurrencies and growth stocks.
Despite these challenges, experts maintain that global economic growth could rebound if financial conditions improve and Middle Eastern conflicts are contained. Historical data indicate that Bitcoin tends to align more closely with liquidity trends over a multi-quarter period, particularly when the Federal Reserve signals a shift toward rate cuts or moderates its balance sheet reduction strategy.
However, participants in the market remain uncertain about future risk asset trajectories, particularly as crypto’s performance has largely mirrored movements in the Nasdaq index. Selby emphasized the potential for increased demand through traditional finance vehicles—such as U.S.-listed spot Bitcoin ETFs and corporate treasuries—which could offer substantial support for a potential upward trend in Bitcoin values. This type of structural demand, according to Selby, is not consistent with previous market cycles, indicating new dynamics at play in today’s economic landscape.
