The old Bitcoin playbook ran on the simple logic that when global M2 expands, capital flows into risk assets, and Bitcoin captures a disproportionate share.
That relationship powered the 2020-2021 bull market, and crypto Twitter spent the better part of 2024 charting M2 overlays as proof that the next leg was imminent.
Now, the global M2 has been expanding while Bitcoin has continued to underperform.
March 2026 US M2 printed at nearly $22.7 trillion, up 4.6% year over year, and Bitcoin spent much of the first quarter unable to hold above $76,000, a level that Real Vision chief crypto analyst Jamie Coutts identified as key resistance on CryptoQuant’s Unbiased podcast.
Coutts’ diagnosis was that the transmission mechanism had changed, as the kind of liquidity now determines if the expansion actually reaches financial assets.
In the post-2008 QE era, the Federal Reserve bought assets directly, flooding the system with bank reserves that had nowhere to go but into equities, credit, and eventually crypto.
Today, Treasury issuance, reserve management, cash balance swings, and bank credit creation have replaced the central bank’s balance-sheet firehose.
The plumbing problem
The US public debt closed the fourth quarter of 2025 at over $38.5 trillion, up 6.3% year over year. Meanwhile, US M2 grew by 4.6% over the same period.
Based on the most basic numbers available, debt is outpacing broad money by nearly two percentage points annually. The debt stock now equals roughly 1.70x total M2, a ratio with no modern precedent in a supposedly accommodative monetary environment.
The Treasury’s own borrowing estimates called for $574 billion in net marketable debt in the January-March 2026 quarter and another $109 billion in April-June, while maintaining a cash balance above $1 trillion.
The Treasury General Account, which sits at the Federal Reserve, held roughly $1 trillion in the latest H.4.1 data. Cash parked at the Fed drains reserves from the banking system even as M2 continues to tick up.
Reserve balances fell to about $2.9 trillion in the Fed’s Apr. 22 release, down approximately $355 billion from a year earlier.
Broad money expands on paper while the plumbing that actually moves reserves into financial markets tightens at the margin.
Bank credit is still expanding, with commercial loans and leases reaching roughly $13.7 trillion by mid-April, while that credit appears to be flowing into real-economy absorption.
At the Apr. 29 FOMC meeting, the policy rate was held at 3.5%-3.75%, and total assets stayed around $6.7 trillion. Officials cited inflation as their primary restraint, with no balance sheet expansion on the agenda.
Why the old chart broke
Coutts argued on the podcast that Bitcoin’s underperformance reflects plumbing friction.
The selloff from late 2024 into early 2025 drew on tightening reserve conditions in the fourth quarter, Treasury dynamics tied to a government shutdown, derivatives-driven deleveraging, and the expanding role of ETF and derivatives markets in Bitcoin’s price structure.
None of those forces appear in a global M2 overlay, as they are features of a financial system in which Treasury supply, reserve management, and funding conditions have become the real battleground.
Gold offers the clearest cross-market confirmation. Central banks bought 244 tonnes of gold in the first quarter, up 3% year over year, with total gold demand reaching 1,231 tonnes and a record $193 billion by value, per the World Gold Council.
Official institutions are hedging sovereign debt credibility at scale, but they are doing it through gold, an asset central banks can legally hold.
The IMF’s latest Fiscal Monitor found that global public debt now looks set to reach 100% of GDP by 2029, with the US and China driving most of the acceleration.
The Congressional Budget Office projects a $1.9 trillion federal deficit in FY2026 and debt held by the public expanding from 101% of GDP to 120% by 2036, a structural supply overhang that will continue to compete with risk appetite for the same pool of reserves and capital.
Two outcomes
In the bull case, inflation cools toward the Fed’s projected path, the Treasury cash balance declines, reserves rebuild, and bank credit continues to expand without a growth scare.
In that setup, the “liquidity is still expanding” thesis regains traction. Bitcoin can re-rate quickly because the debt-to-liquidity mismatch prevents the tightening of financial conditions at the margin.
Coutts treated the $60,000 zone as a value floor and put the odds that the cycle low is already in at better than 50-50.
In the bear case, debt issuance stays heavy, inflation stays sticky, Treasury funding strain persists, and the Fed cannot ease without reigniting the inflation it has spent two years suppressing.
Bitcoin then behaves less like a monetary hedge and more like a high-beta risk asset exposed to rates, funding conditions, and periodic deleveraging.
The April flash PMI from S&P Global already described growth running close to a 1% annualized pace. This fragile expansion does not need to tip into recession to generate the kind of funding shocks that hit Bitcoin hardest.
| Factor | Bull case | Bear case |
|---|---|---|
| Inflation | Cools toward the Fed’s projected path | Stays sticky enough to keep policymakers cautious |
| Treasury cash balance | Declines, reducing reserve drain | Stays elevated, continuing to absorb liquidity |
| Reserve balances | Rebuild from current levels | Stay tight or fall further |
| Debt issuance | Remains manageable relative to liquidity growth | Stays heavy and outpaces liquidity growth |
| Fed stance | Can ease or soften without reigniting inflation | Cannot ease meaningfully without risking another inflation wave |
| Bank credit | Keeps expanding without a growth scare | Expands weakly or is offset by tighter funding conditions |
| Financial conditions | Loosen at the margin | Stay restrictive and prone to stress episodes |
| Market plumbing | Treasury supply and reserves stop acting as a headwind | Treasury funding strain and reserve friction remain the main battleground |
| Bitcoin behavior | Re-rates higher as the liquidity thesis regains traction; $60,000 holds as a value floor | Trades like a high-beta risk asset, with sharp drawdowns, failed breakouts, and possible retests of lower support |
| Investor takeaway | Expanding liquidity is enough to absorb debt and support risk assets | Liquidity may still be growing, but not fast enough to offset debt, reserves, and Treasury supply |
Coutts separates the long-term monetary case for Bitcoin from the medium-term price behavior that reserve flows actually drive.
In a regime where debt outpaces broad money, where the Fed manages from a restrictive floor, where Treasury cash balances drain reserves even as M2 ticks up, the operative question for investors is whether that expansion is running fast enough to absorb debt, reserves, and Treasury supply simultaneously.
Until debt and reserve conditions turn decisively in Bitcoin’s favor, the asset will keep delivering the sharp drawdowns and frustrating consolidations that define a market caught between a constructive long-run thesis and a tighter-than-expected short-run funding environment.
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