Liquidity drives risky investments, and conditions are increasingly favorable across both macro and micro trends.
Historically, large liquidity injections have coincided with strong crypto lineups. The logic is simple: periods of weak economic growth tend to push the Federal Reserve toward looser monetary policy.
In that context, the recent $15 billion Buying government bondsthe largest on record, is expected to boost market momentum.
That said, the liquidity story does not stop at the policy level. On the macro side, global M2 money supply has reached another record high, indicating a continued expansion of “system-wide” liquidity.
Historically, rising M2 has preceded periods of stronger performance in the crypto sector, with marginal liquidity playing an outsized role.
Taken together, the $15 billion in government bond buybacks and the expansion of global M2 point to improving liquidity conditions at the macro level.
From a technical perspective, these types of liquidity flows are typically in line with strong cryptocurrency inflows, reinforcing a bullish backdrop.
It is striking that a similar trend is now visible at a fundamental level. According to DeFiLlama, total stablecoin supply has reached a new all-time high of $320 billion, highlighting the growing on-chain liquidity in the crypto ecosystem.
These flows strengthen the sector-wide expansion, bringing Layer 1 networks back into the spotlight.
In this context, crypto’s recent upward move doesn’t seem like a fluke. As technical and fundamental factors begin to align, price action appears to be supported by improving liquidity conditions rather than short-term speculation.
Does this mark a return to the $3 trillion crypto market cap zone?
Liquidity increases, but does not flow evenly
The impact of these liquidity injections has been remarkable on the crypto market so far.
From a technical perspective, the total crypto market cap has posted three consecutive weeks of gains, with the current week already up more than 6.5% to $2.5 trillion.
This is now a second attempt to break a key resistance that rejected price action during the mid-March rally. Is there finally an outbreak?
According to AMBCrypto, this makes the recent CryptoQuant report relevant. The difference between Bitcoin [BTC] and the S&P 500 widens, with the S&P reaching new highs above 7,020.
In fact, this weak correlation, or possible decoupling with stocks, is now the longest since 2020.
CryptoQuant notes that this divergence reflects relatively weaker momentum in crypto.
From a technical point of view, the contrast is even clearer. While both the SPX and Nasdaq set new all-time highs, major crypto assets like BTC and Ethereum continue to [ETH] are still 40% and 52% lower than their respective peaks.
This gap highlights the current imbalance in performance between stocks and crypto.
Against this backdrop, the current liquidity environment could widen the gap further, leaving crypto underperforming relatively.
If this trend continues, Bitcoin could lag further, weakening the strength of the current cycle. In this context, it would be premature to call this a “non-speculative” cycle.
Final summary
- The global liquidity expansion continues to support a structurally bullish environment for the crypto markets.
- The increasing disconnect between BTC and SPX suggests that capital rotation is favoring equities over crypto, raising questions about the short-term strength of the cycle.