According to reports from Alphractal, Bitcoin is trading roughly 50% below its October peak even as global money supply reaches unprecedented levels. The global M2 money supply recently reached a record of nearly $135 trillion, with the S&P 500 tracking that expansion and trading near its own record highs. This divergence between Bitcoin's performance and broader liquidity expansion has drawn significant attention from market analysts who view liquidity as a leading indicator for risk assets.
As reported by Alphractal, Bitcoin historically follows the same liquidity wave as other assets, though with higher volatility and a longer lag. This relationship held through 2024 and into early 2025 before breaking down. The firm noted that since early 2025, BTC has diverged sharply while M2 continued making new highs and SPX recovered to near-all-time highs, with BTC compressing instead. Alphractal described the current divergence as the most pronounced in their dataset, presenting two potential interpretations for the market.
According to market data, Bitcoin firmed toward $66,000 this week as the US-Iran deal lifted equities and risk assets. However, the broader crypto market has experienced a significant selloff, with Dogecoin sliding below $0.09, a 27-month low last seen in February 2024. As per Sean Dawson, head of research at crypto options platform Derive.xyz, sentiment for crypto is firmly in the gutter as fears surrounding BTC/STRC and its potential overflow compound and overshadow anything that can be read as positive news. The altcoin market has been particularly affected, with NEAR, ethena, and Zcash each declining double digits in the last 24 hours, while Ethereum dropped 4.4% to under $1,780, a level not seen since April 2025.
According to Artemis data, Bitcoin digital asset treasuries (DATs) have taken a big hit, shedding $62 billion in value since the asset's October 6 all-time high, with their fully diluted market cap dropping to $72 billion from $134 billion in early October. Strategy, the DAT pioneer, has been particularly affected, with its market cap standing at $102.2 billion on October 6 and now down to $45.6 billion, a 55% decline. The firm has been in hot water since selling 32 bitcoin earlier this week and because its digital credit instrument, STRC, has been trading below its par value. Meanwhile, Solana ETFs saw $115 million of inflows in May, the highest monthly figure in 2026, though prediction market-implied odds of solana dropping under $60 in the year stand at 60%, an increase from 45% three weeks ago.
According to analyst Martini Guy, the macro backdrop is improving, while Bitcoin has not yet reflected it. The analyst stated that either Bitcoin starts closing the gap with liquidity or its tie to liquidity breaks in a way 'we haven't seen for quite some time'. Alphractal emphasized that which reading applies depends on whether the current divergence reflects a temporary dislocation or a structural shift in BTC's correlation regime, with past divergences in 2018 and 2022 being resolved over 6 to 18 months. However, recent developments show signs of stabilization, with Ethereum increasing more than 9% to trade above $1,800 amid BitMine Immersion Technologies acquiring $139.2 million worth of ethereum, and privacy-focused token Zcash and worldcoin leading market gains, jumping over 22%.
