Bitcoin Trails Money Supply Growth as Energy Costs and Rates Bite
Bitcoin is currently trading at about half of its modeled “fair value” based on global M2 money supply growth, according to CF Benchmarks. Since mid-2025, global M2 has risen 12%, but Bitcoin has dropped 35%. The gap between Bitcoin’s price and liquidity metrics is historically large, as rising money supply has previously correlated with sharp Bitcoin gains. Analysts attribute the disconnect to persistent U.S. monetary tightening; the Federal Reserve has cut its balance sheet from $9 trillion to $6.7 trillion since 2022 and maintained high interest rates, limiting risk asset inflows despite global liquidity growth. High energy prices and inflation further strain household finances and suppress investment flows into assets like Bitcoin. Geopolitical tensions and elevated oil prices also dampen market sentiment. However, if financial conditions ease or Middle East conflicts de-escalate, analysts expect capital to flow back into crypto, with Bitcoin historically closing such liquidity-driven gaps over time. Increased demand from spot Bitcoin ETFs and corporate treasuries is viewed as a new, potentially stabilizing source of structural demand, in contrast to previous cycles. Markets remain sensitive to global economic and monetary policy developments.
