Why Eight Banks Matter
The US Federal Reserve gets the most attention, and for good reason. Dollar liquidity has an outsized impact on global financial conditions because the dollar is the world's reserve currency. But the Fed is only one piece of the puzzle. The European Central Bank, Bank of Japan, People's Bank of China, Bank of England, Bank of Canada, Reserve Bank of Australia, and Swiss National Bank collectively manage monetary policy for the world's largest economies.
These eight central banks do not operate in lockstep. The Fed might be tightening while the PBOC is easing. The BOJ might maintain ultra-loose policy while the ECB raises rates. The global liquidity picture, the one that actually drives risk asset prices, is the sum of all eight, not any single one.
The Aggregate Matters More Than the Parts
Lyn Alden's research found that Bitcoin moves in the direction of global M2 83% of the time, with a correlation of 0.94 between May 2013 and July 2024. Global M2 is the aggregate across all major central banks. Bitcoin's correlation with US M2 alone is lower. The global aggregate captures the total monetary environment better than any single country's data.
US M2 reached record levels in 2025, growing at approximately 4.6% year-over-year by December 2025, the fastest pace since July 2022. But this growth occurred alongside different policy stances in other major economies. The global picture required tracking all eight simultaneously.
Rate of Change Is the Key Metric
The level of global M2 is less informative than its rate of change. A stable $100 trillion global M2 is neutral. A growing $100 trillion (accelerating to $105 trillion) is bullish for risk assets. A shrinking $100 trillion (decelerating to $97 trillion) is bearish. The second derivative (acceleration or deceleration of the growth rate) is even more informative because it captures the turning points that precede major market moves.
The Lag Structure
Changes in global M2 do not affect asset prices immediately. Research suggests a lag of 70-110 days between M2 shifts and their impact on Bitcoin. Coinbase Institutional identified an approximately 110-day lead from global M2 to BTC price. This lag exists because money supply changes take time to flow through the financial system: from central bank operations to commercial bank lending to institutional portfolios to risk asset allocation.
Understanding the lag means that current M2 data tells you about asset price dynamics 2-4 months into the future, not today. Today's prices were influenced by M2 conditions 2-4 months ago. This forward-looking property makes the liquidity scorecard a planning tool, not just a monitoring tool.
Integrating Liquidity with Other Signals
The liquidity scorecard is most powerful when combined with other macro indicators: yield curve slope, credit spreads, equity volatility, and recession probability models. A rising liquidity environment with a steepening yield curve, tight credit spreads, and low recession probability is the most favorable backdrop for risk assets. Any deterioration in these supporting conditions, even with rising liquidity, suggests the bullish case is weaker than liquidity alone would suggest.
Explore these tools on Blockcircle: Global Liquidity Scorecard