The global money supply (M2) is the deepest driver that determines the trends of financial markets. When the amount of money circulating globally expands, investors' appetite for assets capable of absorbing this liquidity—most notably Bitcoin—grows. Recent data shows that the global M2 reached 96 trillion dollars in the last quarter of 2025, the highest level in history. This increase is not just a number; it is a strong pulse that reinvigorates life into alternative assets.
Over the past few years, a strong relationship has emerged between the expansion of M2 and the rising demand for Bitcoin. However, what is important is the time lag in this relationship: each wave of monetary expansion takes about 84 days to fully reflect on the price of Bitcoin. In other words, monetary expansion at the end of 2025 builds the foundation of demand that may appear in the first quarter of 2026. This pattern repeats regardless of market shocks because the abundance of money always finds its way toward higher-yielding assets compared to traditional markets. Yet the picture was not one-sided in late 2025. An opposing factor emerged: the strength of the US dollar.
The dollar index (DXY) rose sharply in October, and with it, dollar-denominated assets, led by Bitcoin, declined. This is not surprising; the historical relationship between Bitcoin and the dollar is inverse with a value of -0.58. The stronger the dollar, the more liquidity seeks safety, and as it declines, risk returns to trading tables. We saw this interaction directly as the rise of the dollar in October pushed Bitcoin into a sharp decline.
Then came the second phase: the entry of massive institutional purchases coinciding with a slowdown in US inflation to 3.7%.
After that, the market movement reversed strongly, and Bitcoin surged by 86.76% in just one week after the report was released—an extraordinary increase even by cryptocurrency market standards. This rebound was not a fleeting speculative move but a deeper message:
Bitcoin is gradually being redefined as a tool for hedging against the erosion of purchasing power, not just a speculative asset. With each slowdown in inflation and each tremor in the dollar, its role in the financial system becomes clearer.
The relationship between Bitcoin and the dollar is not just monthly data, but a constant struggle between expansive global monetary policies and the Fed's tightening or easing policy. When the world expands monetarily while the Fed tones down its tightening rhetoric, the scales tilt directly in favor of Bitcoin. And when the Fed tightens its grip, global risk appetite declines, and Bitcoin finds insufficient support.
Therefore, 2026 enters as a highly sensitive phase if global liquidity expansion coincides with the beginning of a new American easing cycle; we may witness a new wave of funding that could be the largest since 2020. However, if the dollar remains strong or inflation rises again, the path will become more complicated despite the strength of M2.
The real question now is whether Bitcoin is ready to absorb the upcoming wave of liquidity, or does the dollar still have the ability to disrupt this momentum? The information that most investors do not know is that the largest historical Bitcoin peaks did not coincide with the beginning of monetary easing, but rather with the ends of periods when the dollar stops rising—even before the actual start of interest rate cuts.
#Write2Earn $BNB