Bitcoin Lags While Global Liquidity Hits New Highs – Understanding the Delay in BTC’s Reaction

Global liquidity is reaching unprecedented levels in 2026, estimated to be between $123 trillion and $130 trillion. This increase is largely driven by China's accelerated expansion of its M2 money supply. Despite this surge, Bitcoin (BTC) is trailing behind traditional assets like gold and silver. However, this does not signify weakness; rather, it suggests that Bitcoin's response to increased liquidity may be delayed.

Key Takeaways

Global liquidity is hitting record levels in 2026, driven primarily by China's M2 expansion.
Bitcoin is currently trailing behind traditional assets like gold and silver, indicating a possible delay in its response to liquidity increases.
China’s M2 growth serves as a long-term support for Bitcoin, though short-term dynamics are more influenced by market risk appetite.
ETF flow volatility is affecting Bitcoin's price action, demonstrating a complex relationship with market sentiment and institutional strategies.

Bitcoin lags as global liquidity surges - Why is BTC's reaction delayed?

As macroeconomic conditions stabilize, investor risk appetite is slowly returning, but initial investments have gravitated towards conventional hedging assets.

Gold and Silver Performance
Source: X

Gold has appreciated by nearly 70%, and silver has surged around 150%. In contrast, Bitcoin has seen a minor decline of approximately 6-7%. This underperformance should not be interpreted as a lack of strength. Typically, assets with higher beta face more severe price corrections during these market phases. Investors are advised to remain patient and maintain a bullish outlook. While immediate reactions may be muted, historically, increased liquidity has often propelled cryptocurrencies higher in the long run.

The Role of China’s M2 in Supporting Bitcoin's Growth

Between 2024 and 2025, China’s M2 money supply grew steadily from about 45 trillion to 48 trillion, with annualized growth maintained at 8-8.5% until December 2025. This growth rate indicates market stability rather than rapid growth driven by stimulus measures. By 2026, the M2 supply reached approximately 49 trillion, continuing this trend.

China's M2 Growth
Source: X

During this period, Bitcoin's price showed improvement, albeit with a weakening correlation to the M2 growth. Following mid-2025, price movements became more independent, influenced more by market risk appetite and positioning than by immediate liquidity adjustments. In essence, M2 functions as a long-term support factor, while Bitcoin's short-term fluctuations illustrate a divergence from this liquidity support.

How ETF Flow Volatility Influences Bitcoin’s Short-Term Pricing

According to CoinGlass data, spot flow trends turned positive in mid-2025, with repeated green spikes exceeding $300 million aligning with Bitcoin's price trajectory toward the $120,000 to $130,000 range. Increased inflows generally elevate market prices while reducing volatility. However, this momentum began to wane by late 2025.

BTC Price and ETF Flow Trend
Source: CoinGlass

Throughout this volatile period, there were instances of daily outflows exceeding $800 million, with one day seeing outflows close to $1.2 billion as Bitcoin's price sharply fell below $100,000. Monthly net movements remained around $1.2 billion, yet red days were more frequent than green. Overall market sentiment continues to exhibit volatility. Bitcoin enjoys a structural liquidity advantage over market cycles; however, short-term price movements are more susceptible to changes in risk appetite and institutional behavior.

Conclusion

The interplay between global liquidity, traditional assets, and Bitcoin is intricate. While the immediate impacts may show volatility and delays in Bitcoin’s response, the long-term outlook remains optimistic as liquidity tends to fuel cryptocurrency growth over time. Investors should continue to monitor these evolving dynamics for better positioning in the crypto markets.