Bitcoin’s Liquidity-Debt Divergence Risk
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The traditional correlation between global M2 expansion and Bitcoin’s price is breaking down, as rising sovereign debt levels distort liquidity flows. While M2 continues to grow, a significant portion is absorbed by debt servicing, reducing the capital available for risk assets like Bitcoin. This structural shift undermines the simple M2 overlay thesis that many traders rely on.
Bitcoin’s next risk lies in the widening gap between aggregate liquidity and net investable capital. If debt growth outpaces M2 expansion, the liquidity-driven inflows that fueled previous bull runs may be muted. Investors should monitor debt-to-liquidity ratios rather than just M2, as this divergence could cap Bitcoin’s upside in the medium term.
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