Global Net Liquidity Explains Bitcoin's Lag Against Equities

Cryptocurrency analyst Benjamin Cowen explained that Bitcoin's (BTC) recent underperformance against equities is not due to its typically expected relationship with M2 money supply. According to Cowen, global net liquidity, which combines the balance sheets of major central banks and subtracts certain parked funds, is the key metric.

Cowen pointed out that despite record highs in M2 during 2014, 2018, and 2022, Bitcoin suffered significant declines during those years. In contrast, global net liquidity currently sits at $25 trillion, which is well below its peak of $30 trillion in 2021 and 2022.

Cowen drew a parallel between the current market cycle and 2019, when M2 rose, stocks hit all-time highs, and Bitcoin dropped due to low global net liquidity. The analyst noted that the current cycle mirrors this setup but on a larger scale, with AI-driven mega-cap strength keeping the S&P 500 (SPY) elevated and removing pressure from central banks to act.

Cowen believes that the trigger for Bitcoin's next outperformance cycle is straightforward: central banks need a reason to expand their balance sheets again. Until then, Bitcoin will continue to lag equities, he said.