Bitcoin’s response to global liquidity is currently diverging from the previous cycle. Even if broad money supply (M2) continues to expand, the speed of financial tightening brought about by the strengthening of the US dollar far exceeds the intensity of liquidity pushing up prices. The analytical framework of M2 driving Bitcoin seems to be failing.

In the past, lagging global M2 liquidity was the core bullish indicator for Bitcoin. Monetary expansion will eventually flow into risky assets. This rule has been tried and tested repeatedly, and many institutions use it as a "leading indicator for rising prices."

However, the current M2 in the United States is rising month by month, reaching 22.667 trillion US dollars in February, continuing to grow month-on-month. However, Bitcoin is suppressed at around 68,000 US dollars, and the trend is completely contrary to the expansion of liquidity.

The core reason is thatM2 is a monthly stock indicator, and its expansion takes several months to be transmitted to risky assets through credit and capital flows, which is a slow variable.

AndThe strengthening of the U.S. dollar index is a fast variable, and financial conditions will tighten within a few days after rising. The Federal Reserve, the Bank for International Settlements, and the IMF have all confirmed that the appreciation of the U.S. dollar will quickly suppress global capital inflows and risk appetite.

Geographical conflicts and soaring oil prices in March exacerbated this differentiation. The U.S. dollar index rose by 2.35% in a single month, rebounding 5% from the January low, the best quarterly performance since the end of 2024. During the same period, M2 only rose by 1.25%, and the contraction rate was four times that of expansion.

Oil prices have been significantly raised, directly pushing up inflation expectations. The Fed's interest rate cut expectations have plummeted from 50 basis points to 25 basis points, further boosting the US dollar. The M2 data is only released with a lag of one month, which cannot hedge against short-term tightening.

In addition, the global M2 indicator needs to be converted into US dollars, and exchange rate fluctuations will directly distort its authenticity. A stronger US dollar also weakens the liquidity benefit from the indicator level.

This means that M2 can only be used as a long-term background indicator, and the short-term market has been dominated by the US dollar.

Under the bullish scenario, if geopolitical tensions ease, oil prices fall, and the dollar's rise subsides, M2's liquidity benefits will take effect again, and the divergence between Bitcoin and M2 will narrow.

Under a bearish scenario, if oil prices and risk aversion remain high and the US dollar remains strong, the divergence between the two will continue for a long time.

Currently, Bitcoin is no longer a simple leading indicator of liquidity, but a response to the game of macro variables.

The key to follow-up is whether the rise in the US dollar will come to an abrupt end, otherwise the traditional liquidity model will continue to fail. However, in the long run, M2 may still influence the trend of Bitcoin, but the short-term correlation is decreasing.