Global Liquidity Reaches Record High of $130 Trillion – Is 2026 the Year for Risk Assets?

As we approach 2026, indicators of liquidity are showing positive signs. Following three consecutive interest rate cuts in the latter half of the year, which signaled the start of a monetary easing cycle, the overall liquidity environment is improving, providing a favorable backdrop for risk assets.

Key Takeaways

Global M2 Supply has reached a record high of approximately $130 trillion.
China is the leading contributor to this increase, holding about 37% of the total M2.
Other economies, including Japan and India, are experiencing M2 contractions.
The U.S. government's $40 billion Treasury plan aims to promote liquidity in the banking system.
Despite favorable liquidity conditions, risk assets, including cryptocurrencies, remain cautious and have not shown significant gains.

When examining global liquidity indicators such as Global M2, a typical trend shows that risk assets often climb as investors seek higher returns. A similar trend appears to be forming currently, raising hopes for risk assets as we near the end of 2025.

Risk Assets Source: Alphractal

According to data from Alphactral, the Global M2 Supply has surged to unprecedented levels, nearing $130 trillion. However, this growth has not been uniform across all regions, with China emerging as the most significant contributor, accounting for approximately $47.7 trillion or 37% of the total. In contrast, several economies, including Japan, India, Argentina, Israel, and South Korea, are experiencing a contraction in their M2 supply.

Given this scenario, the U.S. government's Treasury plan, which allocates $40 billion, appears to be a strategic maneuver rather than a one-time event. Major economies seem to be engaged in a competition to enhance liquidity, paving the way for a potentially uplifting environment for risk assets as we look towards 2026.

Global Liquidity

Liquidity is Increasing; However, Risk Assets Remain Cautious

Globally, the trend of easing liquidity seems to be synchronized. The U.S. Treasury's $40 billion initiative aims to inject cash into the banking system through the issuance of government debt. This measure is expected to ensure stable funding conditions, providing indirect support for risk assets.

With the Global M2 reaching an all-time high and the Federal Reserve implementing rate cuts along with Treasury measures, the macroeconomic situation appears to be conducive for risk assets. However, the extent of gains in this sector will largely depend on investor sentiment.

TOTAL Market Cap Source: TradingView (TOTAL)

Importantly, despite favorable macroeconomic conditions, the anticipated gains in risk assets have yet to materialize. In fact, despite three rate cuts, the total cryptocurrency market capitalization has dropped by 21% for the quarter, closing out 2025 on a bearish note. This decline leaves risk assets considerably below their peaks reached in late Q3, causing investors to approach 2026 with caution.

Against this backdrop, predicting the influence of liquidity growth on risk assets is complex. However, as the global money supply continues to rise, it may create the conditions necessary for a recovery, making it a crucial factor to monitor in the upcoming months.

Closing Thoughts

The evolving landscape of global liquidity and its implications for risk assets will be an important narrative to follow as we transition into 2026. Observers will be keen to see how these shifts influence investor behavior and market dynamics, especially in the cryptocurrency sector.