Liquidity Gap Fuels Bitcoin's Lagging Performance

Cryptocurrency analyst Benjamin Cowen argued that Bitcoin's (BTC) performance is not directly linked to M2 money supply, which is commonly assumed. He claims that global net liquidity is the key factor in determining Bitcoin's price action.

Cowen tracks global net liquidity by combining the balance sheets of major central banks and subtracting money parked in the Fed's reverse repo facility and the U.S. Treasury General Account. This number currently sits at around $25 trillion, well below the $30 trillion peak in 2021 and 2022.

Cowen drew a parallel to 2019, when M2 rose and stocks hit all-time highs, but Bitcoin still dropped because global net liquidity was not expanding. He believes that the current cycle mirrors this setup on a larger scale, with AI-driven mega-cap strength keeping the S&P 500 (SPY) elevated and removing any pressure on central banks to act.

Cowen sees the trigger for Bitcoin's next outperformance cycle as straightforward: central banks need a reason to expand their balance sheets again. Until that happens, Bitcoin will continue to lag equities.