A new on-chain metric is drawing serious attention across macro and crypto circles. The Liquidity Correlation Index, developed by analysts at On-Chain Mind, tracks the relationship between Bitcoin’s price action and M2 money supply a key global liquidity measure.
The idea is simple. When Bitcoin and M2 move together, the market tends to follow global monetary cycles. But when they diverge, it’s a signal. These dislocations often appear before major moves. They don’t say whether up or down. But they do say this: something is about to happen.
What the data shows
In the latest chart update, a clear blue signal emerged indicating the correlation between Bitcoin and M2 has broken. Historically, similar breaks have occurred right before explosive rallies or cycle tops. It’s not directional. It’s structural. A shift in behavior between money and market.
The upper half of the chart shows Bitcoin’s price. The lower half shows the correlation curve, with blue flares marking dislocations. Every single blue zone in the past five years has been followed by a major volatility phase.
Macro context supports the signal
Independent research confirms the strength of this relationship. A report by 21Shares found long-term correlation between Bitcoin and global M2 liquidity as high as 0.94. Other studies, like CryptoSlate’s 180-day correlation model, show persistent alignment since 2024. And with M2 now at record highs, analysts believe Bitcoin may soon catch up.
The pattern is consistent. M2 expands. Bitcoin lags. Then the market re-prices.
A warning or an opportunity?
With central banks reintroducing liquidity and inflation pressures subsiding, macro conditions are shifting again. The current divergence may represent one of two things: either Bitcoin is late to respond, or it’s decoupling entirely.
Either way, the index is flashing. And when it does, ignoring it has never aged well.
Sources: On-Chain Mind index, 21Shares Research, CryptoSlate, Cointelegraph, Scott Melker, DailyHodl, x.com/@OnChainMind
Date of reporting: July 20, 2025
