TL;DR
- Bitcoin’s price has decoupled from the record expansion in global money supply during 2025, underperforming most traditional assets.
- Institutional flows, including ETFs, show cautious behavior and partial distribution rather than aggressive accumulation.
- Liquidity favored stocks, gold, and AI-linked sectors, leaving Bitcoin in a prolonged consolidation phase despite historically positive conditions for crypto rallies.
Bitcoin’s connection to global liquidity appears weaker than in previous cycles. Even as central banks expanded money supply to unprecedented levels, BTC struggled to maintain its usual upward trajectory, highlighting a shift in investor behavior and capital allocation.
Liquidity Expanded While Bitcoin Underperformed
Throughout 2025, global M2 money supply rose from about $104 trillion to over $115 trillion, surpassing growth levels observed in 2024. In the U.S., M2 climbed from $21.4 trillion to $22.5 trillion by October. Traditionally, Bitcoin rallies have followed such expansions, yet this year BTC only recorded modest gains. Equities, commodities, and gold absorbed the majority of excess liquidity, leaving the cryptocurrency range-bound after a peak near $126,000 in October.
China experienced an even faster increase, with M2 rising roughly 8% from 311 trillion to 336 trillion yuan. Despite this, demand for Bitcoin in Asian markets remained muted, suggesting that sheer liquidity is no longer a sufficient driver of crypto rallies.
ETF Flows Indicate Institutional Caution
Data from Bitcoin ETFs reflects similar trends. December saw mixed inflows and outflows, indicating that institutional investors actively trimmed positions rather than expanded holdings. Bitcoin repeatedly faced resistance near $90,000, with market capitalization around $1.74 trillion, yet momentum remained weak.
This behavior underscores a strategic approach among institutions: they are willing to participate but remain selective, preferring measured accumulation instead of aggressive purchases, particularly near local highs.
Why Historical Trends Are Less Predictive
Bitcoin entered 2025 with deeper institutional adoption and a longer trading history, altering the way liquidity affects price. Capital allocation is increasingly directed toward sectors with clearer short-term returns, such as AI, infrastructure, and commodities. While buyers are still present, accumulation is gradual and sellers frequently appear at resistance levels, limiting rally potential.
Bitcoin may eventually align with the global liquidity expansion, but any recovery appears likely to be gradual. Institutional caution, restrained retail participation, and rotation of capital toward other assets suggest BTC could remain range-bound for several months. The year demonstrates that record money supply growth alone no longer guarantees a strong crypto rally.
