Bitcoin’s Relationship with Money Supply – Here’s What It Means for Your Portfolio

The Relationship Status Is Now “It’s Complicated” – And That Should Matter to You

September 18, 2025

You know that friend who always dates the same type of person? Well, Bitcoin just broke that pattern, and it’s got everyone scratching their heads. For years, Bitcoin has been in a fairly predictable relationship with something called global M2 money supply – basically, when governments printed more money, Bitcoin went up. When they tightened the purse strings, Bitcoin went down. Simple, right?

Not anymore. This September, Bitcoin decided to ghost the money supply entirely, and frankly, nobody knows what to make of it.

What Is This M2 Thing Anyway?

Before we dive into Bitcoin’s relationship drama, let’s talk about M2. Think of M2 as the total amount of money sloshing around in the global economy – cash, savings accounts, and other easily accessible money. It’s like measuring how much spending money everyone has collectively.

For crypto investors, M2 has been the North Star. The logic was beautifully simple: more money in the system means more money looking for places to go, and some of that money finds its way into Bitcoin. It’s like when you get a bonus at work – suddenly, that expensive gadget you’ve been eyeing doesn’t seem so unreasonable.

The Breakup That Nobody Saw Coming

Here’s where things get interesting (and slightly concerning). Throughout September, Bitcoin completely ignored what M2 was doing. While the global money supply continued its usual dance, Bitcoin went off and did its own thing, like a teenager rebelling against their parents.

Analyst Colin Talks Crypto noticed this divergence first. His data shows that over the past three months, the correlation between Bitcoin and global M2 has hit its weakest point since Bitcoin ETFs launched in January 2024. That’s significant because ETFs were supposed to make Bitcoin more institutionally mature, not more rebellious.

Why This Pattern Should Make You Nervous

Here’s the plot twist that’ll keep you up at night: in every single Bitcoin bull market cycle before this one, the correlation with M2 broke down right before Bitcoin hit its peak. Think of it as Bitcoin’s way of saying “I’m about to party too hard and then crash spectacularly.”

Colin admits he’s not certain this pattern will repeat, but he’s watching it like a hawk. As he puts it, there’s a chance the correlation could resume during Bitcoin’s next big vertical move, but there’s no guarantee it will happen at all this cycle.

For you as an investor, this is like discovering your GPS has stopped working right before the most important turn of your journey.

It’s Not Just M2 – Bitcoin Is Having Trust Issues Everywhere

If breaking up with M2 wasn’t dramatic enough, Bitcoin has also decided to ignore traditional assets like stocks and gold. While the S&P 500, Nasdaq, and gold have been hitting new highs throughout September, Bitcoin has been stuck below $120,000, sulking in the corner like a moody teenager.

The correlation with the Nasdaq actually went negative – meaning when tech stocks went up, Bitcoin went down. That’s the financial equivalent of your friend doing the opposite of everything you suggest out of spite.

What the Smart Money Is Actually Doing

Here’s where the data gets really telling. While everyone’s been buying stocks and gold, the on-chain data shows that Bitcoin buying pressure has been surprisingly weak. Most Bitcoin wallet cohorts are showing what analysts call “sell-side pressure,” meaning more people are looking to get out than get in.

In plain English: the smart money isn’t accumulating Bitcoin right now. They’re either holding what they have or quietly heading for the exits.

What This Means for Your Investment Strategy

If you’re a Bitcoin believer: This divergence could be temporary noise, or it could signal that Bitcoin is maturing into an asset class that moves independently of traditional monetary policy. Either way, you need to adjust your expectations and stop using M2 as your primary indicator.

If you’re on the fence: The breakdown in correlations makes Bitcoin even harder to predict than usual. Traditional analysis tools are becoming less reliable, which means higher risk and potentially higher reward – or spectacular failure.

If you’re a portfolio manager: Time to reassess your allocation models. If Bitcoin is no longer following predictable patterns with money supply and traditional assets, your risk management strategies might need a complete overhaul.

The Two Scenarios You Need to Consider

Scenario 1: The Maturation Theory Bitcoin is finally becoming the independent digital asset it was always meant to be. It’s breaking free from traditional financial correlations and establishing its own market dynamics. This could be bullish long-term, even if it makes short-term predictions impossible.

Scenario 2: The Peak Theory Bitcoin is exhibiting the same pattern it showed before previous cycle tops. The breakdown in correlations is a warning sign that we’re approaching a local or major peak, followed by a significant correction.

Your Action Plan in This Correlation Chaos

Diversify Beyond Correlation Plays: If you’ve been betting on Bitcoin based on M2 expansion or traditional asset correlations, it’s time to find new thesis points. Focus on adoption metrics, institutional demand, and technological developments instead.

Watch the On-Chain Data: Pay attention to actual Bitcoin movement and accumulation patterns rather than macro correlations. The blockchain doesn’t lie about who’s buying and who’s selling.

Prepare for Higher Volatility: When traditional correlation tools break down, markets become less predictable. Make sure your position sizing reflects this increased uncertainty.

Keep Some Dry Powder: If we are approaching a cycle peak, you’ll want capital available to buy any significant dips. If we’re just entering a new phase of independence, you’ll want to add to positions on any correlation-driven weakness.

The Bottom Line

Bitcoin’s divorce from global M2 is either a sign of maturity or a warning of an impending correction. The honest answer is that nobody really knows which one it is – and that uncertainty is exactly what makes this moment so critical for your investment decisions.

What we do know is that the old playbook of “M2 goes up, Bitcoin goes up” is officially broken. You’re now investing in an asset that’s writing its own rules, for better or worse.

The key is to stay flexible, watch the data (not just the correlations), and remember that in crypto, the only constant is that everything you think you know can change overnight.

Welcome to Bitcoin’s rebellious phase. Buckle up – it’s going to be an interesting ride.

The market doesn’t care about your expectations. Adjust accordingly.