Bitcoin jumps 21% as record global M2 fuels catch-up trade

Bitcoin climbed 21% in seven days to $79,377 as record global M2 money supply revived a catch-up trade toward parked liquidity.

Easing financial conditions are a tailwind for crypto, Tom Lee, chairman of BitMine, said, citing the US Treasury's expanded bond-buyback program as a driver of risk appetite across digital assets.

The rally accelerated after $2.7 billion in short positions were liquidated on Aug. 21, when Bitcoin rose 6% to near $77,900 in its strongest weekly gain in more than two years, with market capitalization surpassing $1.5 trillion, GuruFocus data shows. The 14-day relative strength index sits at 73.92, in overbought territory.

The test is whether Bitcoin can hold its premium over the coins if the liquidity impulse fades. A firmer tape would validate the catch-up trade, while a drift lower would test how much of the rally is durable, with support at $72,900 and resistance near $79,400.

Record M2 Puts a Floor Under Risk Assets

The record money-supply milestone comes as central banks expand balance sheets. The US Treasury's consideration of tapping its roughly $950 billion cash balance at the Federal Reserve to fund bond buybacks would ease financial conditions further, lowering long-term yields and reducing the relative appeal of risk-free debt. That dynamic historically funnels capital toward higher-risk assets including Bitcoin and Ethereum.

Short Squeeze Adds Fuel

On-chain data shows the move was amplified by forced covering. $2.7 billion in shorts were liquidated across exchanges on Aug. 21, per GuruFocus. Ethereum, the second-largest token, rose roughly 30% over the same week to above $2,500, its strongest weekly gain since May 2025, with Lee calling the move a "launch point" for a larger advance.

The catch-up trade hinges on whether global liquidity keeps expanding. If the Treasury follows through on buybacks and central banks hold the easing line, Bitcoin's run toward the top of its range could extend. A stall in M2 growth, by contrast, would leave the token exposed to a pullback from overbought levels.

This article is for informational purposes only and does not constitute investment advice.