Global liquidity is poised for a significant surge, projected to reach unprecedented levels between $123 trillion and $130 trillion by 2026, largely fueled by China's expanding M2 money supply. While this influx of capital represents a powerful long-term tailwind for the crypto market, Bitcoin's short-term performance has displayed a fascinating divergence, initially lagging behind traditional safe-haven assets before finding its own drivers.
The Macro Tailwinds: Global Liquidity and China's M2
The substantial increase in global liquidity, primarily driven by China's steady M2 expansion from 2024 to 2026, creates a robust foundation for asset appreciation. Historically, heightened liquidity acts as a consistent booster for crypto upside. However, initial capital rotation has favored traditional hedges, with gold soaring nearly 70% and silver a remarkable 150%. Bitcoin, in contrast, saw a temporary dip of 6-7%. This initial underperformance is not indicative of weakness but rather a common characteristic of higher-beta assets, which typically experience more aggressive repricing in later stages of liquidity transmission. China's M2 growth, though stable rather than stimulated, serves as a crucial long-term macro environment supporting Bitcoin's structural ascent.
Short-Term Drivers: ETF Flows and Risk Appetite
Despite the long-term structural tailwind provided by global liquidity, Bitcoin's short-term price action has increasingly decoupled from immediate liquidity flows since mid-2025. Instead, market sentiment, risk appetite, and institutional positioning, particularly through Exchange Traded Fund (ETF) flows, have become the dominant forces. Mid-2025 saw significant positive spot ETF inflows, with green spikes exceeding $300 million aligning with Bitcoin's climb towards the $120,000-$130,000 range. However, this momentum proved volatile; late 2025 witnessed substantial outflows, including daily figures surpassing $800 million and even $1.2 billion, causing Bitcoin to fall drastically below $100,000. These fluctuating ETF flows and shifts in investor risk appetite continue to shape Bitcoin's immediate trajectory, underscoring a market where sentiment and institutional activity play a pivotal role.
