BTC’s setup is framed as a liquidity paradox: global M2 and the stock market sit near all-time highs, yet BTC’s behavior lines up better with global net liquidity than with money supply alone. The core claim is that M2 can expand while BTC still stalls or falls; the tighter driver is the rate of change in global net liquidity, which is still far below 2021-2022 levels. That lens is used to explain BTC’s weaker performance versus equities, its apathy-style cycle top, and the lack of a major alt rotation. The same framework is extended to argue BTC could keep underperforming until net liquidity has a real reason to rise, even though it likely rises over a long enough horizon.
Global M2 is at all-time highs, but that alone did not prevent BTC from falling in 2014, 2018, 2022, or even as late as March.
2019 is the closest analogue: money supply rose, BTC still dropped, and stocks pushed to all-time highs.
The relevant BTC variable is flow, framed mathematically as the second derivative, not the level of M2.
Global net liquidity is defined as the Fed, BOJ, Bank of China, UK, and ECB balance sheets minus reverse repo and the TGA, used to gauge whether conditions are supportive or restrictive.
Global net liquidity is now around 25T, versus about 30T in 2022 and nowhere near the 2021-2022 highs — roughly $5T lower across the aggregated balance sheets.
Because the net-liquidity measure is converted into one currency, a stronger dollar reduces liquidity and a weaker dollar typically increases it.
BTC stalled in 2019 and only resumed when global net liquidity turned up very quickly; the same pattern is said to fit this cycle.
The 2020 pandemic liquidity surge is tied to central banks having a reason to expand balance sheets, which then lifted BTC.
AI-led narrow leadership in stocks — GOOGL, MSFT, AMZN, and AAPL doing well while many S&P 500 names struggle — is said to reduce Fed urgency and keep net liquidity low.
The current setup is cast as a much larger version of 2019-2020, with BTC having just lived through a 4-year-cycle bull market inside quantitative tightening and high rates.
The prior cycle also had a QT bull market plus a QE bull market after a mid-cycle interruption, and the next policy risk is that the Fed may raise rates while Kevin Warsh favors shrinking the Fed’s balance sheet.
Global net liquidity, not M2, is said to explain why BTC underperformed in 2018, 2019, and 2020 even when it could still rise somewhat while net liquidity stalled.
BTC made new all-time highs this cycle, but versus the S&P 500 its valuation has been falling; it is now back around the same relative level seen in 2021 and early 2022.
Since global net liquidity started falling in early 2022, BTC has been stuck in ‘traffic on struggle street’ for 5 years and could keep lagging the stock market until net liquidity has a reason to rise.
The cycle’s peak-to-peak drawdown is described as much milder than the last three cycles, with the top arriving on apathy rather than euphoria and with no meaningful alt rotation.
The paradox is resolved by replacing M2 with global net liquidity: the claimed answer has been visible since 2019, and BTC should outperform once that liquidity regime turns.