Is the Macro Case for Bitcoin Unraveling?

Introduction

For more than a decade, bitcoin’s relationship to global liquidity has been one of the most compelling frameworks for understanding its price behavior. As money supply expanded and bitcoin’s supply remained constrained, the asset generally appreciated alongside rising liquidity.

Recently, however, that relationship has begun to break down. Despite continued growth in global M2, bitcoin has diverged from historical trends, raising a key question for investors: Is the macro case for bitcoin unraveling, or has the nature of liquidity itself changed?

Key Takeaways:

• Bitcoin’s historically strong relationship with global liquidity appears to be breaking down, with price diverging despite continued M2 expansion.
• The key question is whether this challenges the thesis itself or reflects M2’s declining effectiveness as a measure of liquidity.
• Bitcoin’s core value proposition appears to remain intact, supported by ongoing institutional building and on-chain adoption metrics.
• The short-term disconnect may instead reflect alternative liquidity headwinds, including AI-driven spending absorbing an increasing share of global capital flows.
• Bitcoin’s decoupling from major asset classes could strengthen its role as a diversified macro asset and potential hedge against monetary debasement.

A Simple but Effective Macro Thesis

The original hypothesis was simple: if bitcoin’s price is measured in fiat currencies, then as the quantity of these currencies increases while bitcoin’s supply growth remains constrained—and even slows—its price should rise, all else equal.

More quantitatively, as the global M2 money supply expands, bitcoin’s price should increase by as much (or potentially more when accounting for adoption and other demand-side factors). This is a simplified “blackboard model” that may not hold, but it nevertheless provides a useful starting point for evaluating bitcoin.

For over a decade, the relationship appeared to hold, with bitcoin’s price generally rising and falling alongside changes in global M2 money supply.

While evident in the chart “Global M2 and Bitcoin YoY Change,” the data analysis also supports the M2 hypothesis. The correlation coefficient is 0.86 across the full data set and increases to 0.93 when viewed on a logarithmic basis. 

Furthermore, the R² was 0.86, meaning 86% of bitcoin’s price change can be explained by changes in the global M2 money supply. 

These figures have not meaningfully changed and have even increased since Fidelity Digital Assets® Research last examined them in late 2024. However, to reiterate a point from our previous article, correlation does not necessarily imply causation. 

But Recent Correlations Have Crumbled 

While the full dataset still exhibits strong and statistically significant correlations, the relationship has clearly shifted over the past year or more. Despite continued expansion in global money supply, bitcoin has moved in the opposite direction of what the historical relationship would suggest.

The chart “Rolling 24-Month Correlation of BTC Price and Global M2 Changes” highlights this shift, with the rolling correlation deteriorating precipitously from a high positive average to negative, confirming the divergence seen in the previous chart, “Global M2 and Bitcoin YoY Change.”  

Why? Two Paths to Explore

When the data starts to contradict a hypothesis, there are two possible paths to explore. 

Is the Store of Value Hypothesis Invalid? 

The first explanation is that the initial hypothesis was incorrect. 

In this case, bitcoin’s thesis as an emerging monetary good may no longer hold. It would imply investors no longer view bitcoin as an aspiring store of value, and continued money creation would not translate into demand for bitcoin as an asset or hedge against monetary debasement. 

Possible explanations include investors finding more attractive stores of value in stocks, real assets, or traditional alternatives such as precious metals. Even if bitcoin offers advantages over traditional investments, investors may not view those benefits as compelling enough to offset the required due diligence and switching costs. 

In fact, Fidelity Digital Assets® Research identified this as one of the key risks investors should consider when evaluating bitcoin, noting:

While we have outlined Bitcoin’s core value propositions and characteristics that are unmatched by any other digital asset (credible scarcity, immutable, decentralized, censorship-resistant, etc.), this does not mean other users or investors will value these traits as much. Bitcoin’s success and increased adoption (and consequently an increase in its price and market capitalization) is not guaranteed and, instead, is a direct result of
more and more people valuing these things over alternative or competing investment vehicles and digital assets.

While investors should continue to consider the possibility that the original hypothesis is invalid, we do not believe the evidence supports that conclusion as of today. 

First, bitcoin is not unique in this divergence. Traditional stores of value such as gold have also retreated at times and even exhibited negative correlations with money supply growth. 

Second, it is important to distinguish true apathy in bitcoin itself from the relatively short period of price volatility. On-chain data suggests adoption remains resilient, even as some metrics have stalled or waned.

Furthermore, this is the first cycle in which bitcoin has experienced a significant price decline while entrepreneurs, businesses, and financial institutions in particular continue to build and acquire in the space. If market participants were broadly questioning bitcoin’s long-term value proposition, then we would expect adoption and investment activity to retreat.

Is M2 the Appropriate Data to Evaluate the Hypothesis?

The alternative explanation is that the hypothesis remains intact but the underlying relationship has changed or the data is no longer capturing it effectively. 

M2 is a widely used and well-understood measure of money supply. However, it also was originally published in 1971. While it remains a useful measure of cash and cash-like instruments, it may not be the most effective proxy for liquidity in today’s financial system.

Although cash may have been a significant source of liquidity fifty years ago, today liquidity is created and absorbed through a broader set of channels, including derivatives, repo markets, and other forms of market-based financing that are not accounted for in traditional M2 measures. 

In the context of bitcoin as a potential “liquidity sponge,” the relevant liquidity may be the capital circulating through financial markets rather than the broader banking system. M2 may increasingly capture liquidity flowing into the “real” economy, such as business investment and capital expenditures.

This aligns with economist Carlota Perez’s framework outlined in Technological Revolutions and Financial Capital. Perez distinguishes “production capital” (the industries and businesses that adopt new technology) from “financial capital” (the financial companies and related activity that helps finance the new technology). M2 may currently be capturing more of the former, and less of the latter. 

The Rise of AI

This raises another possibility: The rise of AI and its associated capital expenditures may be redirecting liquidity that may have otherwise flowed into financial assets such as bitcoin. 

Large technology companies have shifted from being major generators of excess cash to major consumers of capital. In addition to deploying free cash flow at record rates, many are raising additional funds through debt and equity markets to finance AI-related investments.

As a result, these companies have become net absorbers rather than providers of market liquidity, directing capital toward infrastructure and productive investment instead of financial assets (such as bond buying and stock buybacks). In Perez’s framework, activity may be shifting from “financial capital” to “production capital.”

While anecdotal, the rise in hyperscaler capex (capital expenditures by the largest cloud and AI infrastructure providers) over the past two years has coincided with bitcoin’s decline in price.

Other Liquidity Factors

Finally, other macro factors not captured in M2 may also be offsetting the effects of money supply growth. 

Since bitcoin’s October 2025 all-time high, the U.S. Dollar Index has risen approximately 5%. A stronger dollar generally tightens financial conditions and can reduce the relative attractiveness of assets such as bitcoin.

Additionally, oil prices have increased nearly 40% over the same period and are currently moving higher again after a respite. While geopolitical uncertainty can support demand for alternative assets, persistently higher oil prices can act as a net liquidity detractor. 

Simultaneously, signs of stress have emerged in segments of the private credit market, potentially pointing to tighter funding conditions. In addition, the new Fed chair has been perceived as more hawkish than what market participants expected, with market expectations shifting from rate cuts to the possibility of a rate hike in 2026.  

All of these factors should be considered alongside M2, as the primary goal is to measure and assess global liquidity, not simply the amount of base money in the system. 

The Silver Lining: Decoupling has (Finally) Arrived

While bitcoin’s recent price decline has been disappointing for investors, it is important to note its role in a diversified portfolio. Investors generally seek assets that are not highly correlated with each other. 

In prior periods, bitcoin has exhibited high correlations with gold, stocks, and even specific sectors such as technology. This has led some investors to question bitcoin’s value in a portfolio if it merely acted as a levered version of assets they already owned. 

However, the recent decline has coincided with meaningful decoupling from major asset classes, including gold and, in particular, the S&P 500. From a portfolio construction perspective, Fidelity Digital Assets Research views this as a positive development.

Conclusion: Looking Ahead 

Fidelity Digital Assets Research will continue to evaluate bitcoin as a macro asset class, not as a vehicle for short-term trading, but as a potential allocation within a well-diversified portfolio where its value proposition remains a hedge against large-scale monetary debasement. 

Zooming out, history has shown that periods of market instability, funding stress, and liquidity shortages have ultimately been met with liquidity interventions. In the past, those interventions have eventually flowed into bitcoin and, in our view, are likely to do so in future episodes as well. 

To be clear, the relationship may not be immediate. In times of stress, correlations across assets tend toward one, meaning bitcoin, as in the past, could suffer as well. The relationship should not be expected to be one-to-one either, as liquidity is diffused among many different assets and even consumer prices depending on the specifics. 

However, based on bitcoin’s characteristics as an emerging money and store of value, we would expect over the long-term these liquidity relationships to reassert themselves once again.

Interested in discussing bitcoin’s role in a portfolio? Get in touch.