The myth that crypto twitter always miss

In the volatile world of cryptocurrency trading, the "Global M2 Money Supply" is often cited as the ultimate compass for Bitcoin’s price action. The logic used by most retail investors is simple: More money in the system equals higher asset prices.

However, historical data from the 2011, 2013, 2017, and 2021 market tops reveals a much more predatory pattern. While "Crypto Twitter" and mainstream analysts scream that rising liquidity is a bullish catalyst, the charts tell a different story—one of a sophisticated 3-Phase Liquidity Trap designed to catch retail "longs" at the worst possible moment.

The Lag Effect: Understanding the Macro Divergence

The fatal flaw in the common liquidity narrative is the failure to account for momentum and lag. Bitcoin does not move in a 1:1 lockstep with the Global M2 supply. Instead, Bitcoin acts as a leading indicator, often exhausting its upward momentum months before the global money supply reaches its absolute peak.

By analyzing the 2011–2026 cycles, we can identify a consistent playbook that "Smart Money" uses to exit the market while retail investors are still buying into the "rising liquidity" hype.

Phase 1: The Peak and The Great Convergence

The first stage of the trap occurs when Bitcoin reaches its definitive cycle high. At this exact moment, the Global M2 (Liquidity) line is usually still trending aggressively upward.

The Psychology: Because the money supply is still growing, investors assume that Bitcoin is merely "taking a breather" before a secondary leg up.

The Reality: The "velocity" of money—the speed at which it flows into high-risk assets—has already peaked. The price begins to stagnate or "converge" with the rising M2 line. This is the first signal that the bull market engine is running out of fuel, despite the "tank" (Total M2) still being full.

Phase 2: The Bull Trap (The "Catch-Up" Illusion)

As we move into the second phase, Bitcoin often experiences a period of sideways consolidation or a small, deceptive "relief pump." This is where the majority of retail traders are liquidated.

The Narrative: Analysts point to Global M2 hitting a new All-Time High (ATH) and claim that "Bitcoin hasn't caught up to the money supply yet."

The Trap: This is the Distributional Hand-off. Large institutions and whales use this final surge in global liquidity to sell their holdings into the buying pressure of retail traders. These retail traders are buying the "dip," convinced by the rising M2 line, unaware that they are providing the necessary "exit liquidity" for the smart money to leave the building.

Phase 3: The Synchronized Fall (Liquidity Exhaustion)

The final stage is the most painful for those caught in Phase 2. Once Global M2 momentum finally rolls over and the blue line begins its descent, the floor falls out of the market.

The Result: The "Lag Effect" expires. Having failed to make new highs during the peak liquidity window, Bitcoin begins a violent "Catch-Down" to reality. As liquidity is drained from the global system, both M2 and Bitcoin price fall in tandem. This is the period of maximum pain, where the cycle low finally begins to form—but only after the liquidity mirage has completely vanished.

A Historical Retrospective: Year-by-Year

To understand why the 2025/2026 cycle is playing out this way, we must look at the precedent set by previous tops:

2011: The First Mirage

In June 2011, Bitcoin reached its first major cycle peak. At that exact moment, the blue line of Global M2 was still trending upward aggressively. Retail traders, seeing the influx of global money, expected Bitcoin to continue its vertical climb.

Instead, Bitcoin began a sharp correction (the yellow arrow). By the time Global M2 actually reached its local peak in August 2011, Bitcoin had already lost a significant portion of its value. This was the first historical proof that rising liquidity does not guarantee rising prices once the "lag effect" has been exhausted.

2013 – 2014: The Distribution Phase

The 2013 bull market followed a similar playbook. Bitcoin peaked in late 2013, but Global M2 continued to push higher into early 2014.

This created a massive Convergence Zone (the gray box on your chart). During this window, the "bulls" pointed to the rising blue line as proof that a new high was coming. However, as you noted, this was merely the distribution phase where smart money exited into the rising liquidity. Once the M2 line finally flattened and fell, Bitcoin entered a multi-year bear market.

2017 – 2018: The Trap of the ATH

In December 2017, Bitcoin hit the famous $\$20,000$ mark. Just as in previous cycles, Global M2 did not peak at the same time; it continued to rise through January and February 2018.

Social media was flooded with claims that "there is more money than ever, so BTC will hit $50k." In reality, the price and liquidity were diverging. Bitcoin was falling while M2 was rising. This "Phase 2" bull trap caught thousands of long traders who thought Bitcoin was simply lagging behind the money supply. When the blue line finally rolled over, the "Catch-Down" was violent and sustained.

2021 – 2022: The Double Top Deception

The 2021 cycle featured a "Double Top" in price, but the Liquidity Trap remained the same. Bitcoin reached its final peak in November 2021, yet Global M2 didn't reach its absolute peak until March 2022.

For four months, the "liquidity is rising" narrative kept retail traders in the market. They were trapped in your "Phase 2" illusion, believing that the all-time high in M2 would eventually pull Bitcoin back up. Instead, M2 began its Phase 3 descent, and the market witnessed the massive deleveraging events of 2022.

2025 – 2026: The Current Reality

We are now seeing the same playbook in the current 2025/2026 window.

Phase 1 (Late 2025): Bitcoin hit a peak, while Global M2 continued its march toward $100 Trillion.

Phase 2 (Early 2026): We are currently in the "gray box" period. M2 is at or near an all-time high, and social media is using this as a bullish signal.

Phase 3 (The Looming Drop): The chart warns that the yellow arrow is next. The divergence is clear: Bitcoin is struggling to maintain its highs while the "fuel" (M2 momentum) is starting to dry up.

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