Bitcoin Market Cycles and Global M2 Money Supply: A Historical Analysis

As Bitcoin gained prominence over the years, its boom-and-bust cycles have become increasingly intertwined with broader macroeconomic forces—especially the ebb and flow of global liquidity. Global M2 refers to the worldwide broad money supply, encompassing cash and deposits across major economies (such as the U.S., Eurozone, and China), and serves as a proxy for global liquidity. When central banks expand the money supply—through measures such as low interest rates or quantitative easing—financial liquidity increases; when they tighten policy, liquidity growth slows or even reverses. Bitcoin, as a speculative asset class, tends to thrive in “easy money” environments and struggles when liquidity dries up. In fact, over the long term, Bitcoin’s price has shown a strong correlation with global M2 growth. An analysis by macroeconomist Lynn Alden found a 0.94 correlation between Bitcoin and global liquidity from 2013 to 2024. This article explores the full history of Bitcoin (2009 to present) to examine how major bull and bear markets have aligned with shifts in the global money supply, highlighting key macroeconomic patterns, points of convergence (when Bitcoin and liquidity rose together), and divergence (when they decoupled). Along the way, we’ll define essential terms and provide charts to visualize Bitcoin’s price cycles alongside global M2.

What is Global M2 Money Supply

Global M2 money supply refers to the total amount of broad money circulating within the global financial system. It includes physical currency (cash and coins), demand deposits (checking accounts), and near-money assets such as savings deposits, money market securities, and other easily accessible forms of money. M2 is considered a key indicator of liquidity in an economy. When viewed globally, it aggregates the M2 money supplies of major economies—such as the United States, Eurozone, China, and Japan—typically measured in U.S. dollar terms for consistency. Changes in global M2 reflect central banks’ monetary policies: expansionary actions like interest rate cuts and quantitative easing increase M2, while tightening measures reduce its growth. Because it captures the flow of money available for spending, investment, and speculation worldwide, global M2 is often used as a macroeconomic signal to assess market liquidity and risk appetite across asset classes, including cryptocurrencies like Bitcoin.

Bitcoin Cycles and M2: Background and Context

Bitcoin market cycles typically last around four years and include a bull market (rapid price rise to a peak) followed by a bear market (significant decline from the peak). These cycles have coincided with Bitcoin’s halving schedule (the reward halved every 4 years), but external macroeconomic conditions have also played a critical role. M2 money supply (broad money) includes cash in circulation plus easily accessible deposits. Global M2 expands when central banks implement expansionary monetary policies (e.g. cutting rates, quantitative easing) or governments enact large stimulus, and contracts or grows more slowly when policies tighten. An expanding global M2 means more liquidity sloshing around – investors often take on more risk, benefiting assets like stocks and Bitcoin. Conversely, slowing or shrinking M2 means liquidity is being withdrawn, often leading investors to risk-off behavior. We will see this dynamic repeatedly in Bitcoin’s history: periods of rapid global M2 growth have often overlapped with Bitcoin bull runs, whereas periods of monetary tightening have seen Bitcoin stagnate or crash. That said, correlation is not perfect – Bitcoin can be affected by internal crypto-specific events and its own halving cycle timing, causing short-term divergences from macro trends​.

2009–2012: Post-Crisis Liquidity and Bitcoin’s Emergence

Bitcoin was launched in the aftermath of the 2008 financial crisis, a period when central banks around the world injected large amounts of money into the global economy. The U.S. Federal Reserve cut interest rates to zero and introduced Quantitative Easing (QE) programs—QE1 in 2008–09 and QE2 in 2010—while other central banks, such as the Bank of England and the People’s Bank of China, also implemented major stimulus measures. Global M2 surged during this period; for example, China’s broad money supply increased by approximately 30% year-over-year in 2009 due to a massive credit stimulus. This expansion in global M2 (money supply) created a liquidity-rich environment in which Bitcoin’s price rose from just a few cents to around $30 in 2011 before falling, reflecting both early enthusiasm and sensitivity to short-term liquidity changes. However, later in 2011, global liquidity conditions briefly tightened: the Fed ended QE2 in June, and the European Central Bank (ECB) raised interest rates amid short-lived inflation concerns, even as the Eurozone sovereign debt crisis was unfolding. Bitcoin’s early rally quickly reversed, and by late 2011, its price had crashed below $5, marking its first significant bear market.

2013–2015: The 2013 Bubble and the Taper

By 2013, global liquidity was abundant. The U.S. was running QE3 (monthly bond purchases), Japan launched aggressive easing under “Abenomics,” and China’s M2 had nearly doubled since 2008. This easy money environment helped fuel Bitcoin’s bull run that year. Bitcoin surged from around $13 in January to over $200 in April, and after a mid-year dip, rallied again to ~$1,100 in November. At the time, the Fed’s balance sheet and global M2 were near record highs.

However, in December 2013, the Fed announced it would begin tapering QE, marking a shift in policy. Global M2 growth slowed in 2014 as the Fed reduced bond purchases and China tightened credit. Almost immediately, Bitcoin entered a severe bear market. While events like the Mt. Gox collapse and the bursting of the 2013 bubble also played a role, the macro backdrop also became less supportive. By October 2014, QE had ended, and by January 2015, Bitcoin had fallen to roughly $200—an ~85% drop. Global M2 growth also weakened as the U.S. stopped expanding its money supply and the dollar strengthened.

2016–2017: Easy Money Era and a Mainstream Rally

After the 2014 downturn, global monetary conditions eased again. In 2015–2016, the ECB began large-scale asset purchases, and the Bank of Japan kept its ultra-loose policies, offsetting earlier Fed tightening. By 2016, many central banks were still easing, with interest rates near record lows and global M2 rising steadily. The Fed’s first post-crisis rate hike came in late 2015 but further increases were paused in 2016 due to market volatility, keeping liquidity high through 2017.

Against this backdrop, Bitcoin entered a new bull market. Starting around $400 in early 2016, it soared to nearly $20,000 in December 2017. This was Bitcoin’s first mainstream rally, fueled by the ICO boom and growing retail interest. Global M2 hit new highs, supported by the ECB’s QE and steady growth in China’s money supply (~9–11% annually). Although the Fed and China signaled future tightening in late 2017, the impact lagged, and liquidity remained strong. In short, the 2016–2017 rally occurred during a period of sustained global “easy money.”

2018–2019: The Hangover and a Liquidity Squeeze

2018 was a reversal of 2017: as global liquidity tightened, Bitcoin crashed. The Fed raised rates more aggressively and began quantitative tightening, shrinking its balance sheet. At the same time, the U.S. dollar strengthened, which slowed global M2 growth in USD terms. By mid-2018, liquidity had stalled. Bitcoin’s price fell sharply—from around $20,000 to roughly $3,200 by December. While events like the ICO bubble burst and regulatory pressure contributed, the broader macro backdrop of tighter money played a key role. Other markets also struggled—U.S. stocks corrected, and emerging markets saw capital outflows.

Bitcoin’s fall aligned with this liquidity squeeze, though crypto-specific issues amplified the drop. By early 2019, central banks reversed course: the Fed paused and later cut rates, while the ECB hinted at more easing. China also injected liquidity. Bitcoin responded, jumping from ~$3,000 to nearly $14,000 by mid-2019. Though it didn’t hit new highs, the rebound tracked renewed monetary support. 

2020–2021: Unprecedented Money Printing and a Crypto Super-Bull

The COVID-19 pandemic in early 2020 triggered an unprecedented wave of global monetary and fiscal stimulus. As markets crashed—including Bitcoin, which dropped nearly 50% on March 12—central banks responded swiftly. The U.S. Fed cut rates to zero and launched unlimited QE, expanding its balance sheet by trillions. U.S. M2 grew 26.9% year-over-year, a record pace. The ECB, Bank of Japan, and others also injected massive liquidity, while governments rolled out large-scale fiscal support.

By late 2020, global M2 had surged to new highs, creating a flood of liquidity. Bitcoin rebounded from $10,000 in September to ~$30,000 by December, then soared to $64,000 by April 2021. M2 growth peaked in early 2021 as the U.S. had injected about $5 trillion. As liquidity moderated, Bitcoin dropped over 50% mid-year, but a second wave of loose policy in Europe and Japan helped it rally to a new high of ~$69,000 in November 2021.

2022: Tightening the Tap and Crypto Winter

In 2022, central banks shifted aggressively to tighten monetary policy in response to soaring inflation. The U.S. Federal Reserve raised interest rates from 0% to over 4% and began quantitative tightening. Other major banks, like the ECB, also raised rates. As a result, global M2 growth halted, and U.S. M2 even saw its first annual decline in over 60 years. A strong dollar further reduced the USD value of global M2.

This rapid pullback in liquidity hit risk assets hard—Bitcoin fell from ~$47,000 in January to ~$16,000 by November. Events like the Terra/Luna crash and FTX’s collapse worsened the decline. With investors favoring safer assets and less cash in the system, Bitcoin’s price declined and followed the tightening trend. 

2023–Present: Recovery Amid Mixed Liquidity Signals

By early 2023, inflation was easing, and central banks began slowing their rate hikes. While the U.S. continued tightening, others—like the Bank of Japan and China’s central bank—eased policy, injecting liquidity that helped offset the global squeeze. As a result, global M2 began to grow modestly again, reaching a new all-time high by early 2024.

Bitcoin, which had hovered around $16,000 at the end of 2022, started recovering. It doubled in price through 2023, ending the year near $30,000, as investors grew optimistic that central banks might soon pivot to easing. Though 2023 didn’t bring massive money printing, stabilized global M2 and easing outside the U.S. improved conditions for risk assets like Bitcoin. Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with a significant risk of loss due to its high price volatility, and is not suitable for all investors. Please refer to our Terms.