The Bitcoin Liquidity Indicator tracks the correlation between global M2 money supply / central bank balance sheets and Bitcoin price. The historical +0.82 correlation (long-run rolling, unstable, with documented negative phases) makes it one of the most documented macro indicators for BTC price cycles. Past performance does not guarantee future results.
GLI (index) vs BTC price ($000s) — 2020 to 2026
Bitcoin has no earnings, no dividends, and no yield. Its price is entirely determined by supply and demand — and demand is overwhelmingly driven by the availability of capital in the global financial system. When central banks inject money through QE or rate cuts, this liquidity floods into risk assets, with Bitcoin absorbing a disproportionate share due to its fixed supply.
The mechanism has a predictable 10–12 week lead time: as global M2 expands, Bitcoin price tends to follow within 2–3 months. This lead time exists because institutional capital allocation cycles (fund deployment, quarterly rebalancing) create a natural lag between macro conditions and crypto market pricing.
The numbers are stark: during M2 expansion cycles (2020–2021, 2023–2026), Bitcoin has averaged +320% returns. During M2 contraction cycles (2022), Bitcoin fell 77%. Understanding the liquidity cycle is a widely-used approach to Bitcoin macro trading — though past correlations and lead times are not guaranteed to repeat.