Bitcoin’s Growth Trails Global Money Supply Expansion: What This Means for Digital Gold

Bitcoin isn't keeping pace with the world's money printers. While central banks continue expanding balance sheets and governments run deficits, the premier cryptocurrency's market cap growth has lagged behind traditional monetary expansion—raising questions about its 'digital gold' narrative.

The Monetary Mismatch

Global M2 money supply has ballooned over the past decade, with major economies injecting trillions into their financial systems through quantitative easing and pandemic stimulus. Bitcoin's total market capitalization, while impressive in absolute terms, hasn't maintained proportional growth against this tidal wave of fiat creation.

Network Effect vs. Monetary Inflation

Bitcoin's value proposition has always been scarcity—only 21 million will ever exist. But that mathematical certainty collides with the practical reality of global finance: when traditional money supply grows faster than Bitcoin adoption, its relative purchasing power faces headwinds. The network needs to onboard capital faster than central banks can print—a daunting challenge when you're competing with institutions that create money with keystrokes.

The Institutional Adoption Gap

Wall Street's embrace of Bitcoin ETFs and corporate treasuries adding BTC to balance sheets marked significant milestones. Yet this institutional flow represents just a fraction of the capital sloshing through traditional markets. Until pension funds, sovereign wealth funds, and mainstream portfolios allocate meaningful percentages to digital assets, Bitcoin will struggle to absorb global liquidity overflows.

Technological Scaling Limitations

Bitcoin's security-first design comes with throughput tradeoffs. While Layer 2 solutions like Lightning Network improve transaction capacity, they haven't yet achieved the seamless scalability needed for global adoption. Compare this to traditional payment rails that settle trillions daily—Bitcoin's infrastructure still feels like building a highway while fiat supertankers sail past.

The Volatility Tax

Here's the cynical finance jab: Bitcoin charges a 30% annual volatility tax while central banks offer the 'stability' of guaranteed currency devaluation. Most investors would rather lose purchasing power predictably than face portfolio swings that trigger margin calls—which explains why money continues flowing into assets that quietly bleed value.

Long Game vs. Short Reality

Bitcoin maximalists point to multi-decade time horizons, arguing that sound money always wins eventually. They're not wrong about the endgame—history shows hard assets outperform fiat over century-long periods. But in the quarterly-report-driven world of modern finance, 'eventually' doesn't pay this year's bonuses or meet next quarter's targets.

The narrative hasn't broken—it's just facing its first real stress test against the relentless machinery of global finance. Bitcoin either accelerates its adoption curve or watches from the sidelines as freshly printed dollars, euros, and yen find homes everywhere except the blockchain.

In brief

• Bitcoin remains below the $100,000 mark while global liquidity reaches record levels.
• A Bitwise report reveals a 66 % valuation gap between BTC and global monetary growth.
• According to their models, the theoretical fair value of bitcoin could be around $270,000.
• 2026 could mark a turning point if the market finally reacts to current macroeconomic fundamentals.

Bitcoin facing a historic undervaluation according to Bitwise

In its latest macroeconomic report dedicated to bitcoin, the asset manager Bitwise reveals a major undervaluation of the asset compared to the global monetary environment.

“Bitcoin underperforms the global money supply by 66%, implying a fair value close to 270,000 dollars”, explains the report, based on a cointegration model between BTC and the global monetary aggregate M2, currently estimated at 137 trillion dollars. This gap WOULD mark one of the largest discrepancies ever observed between the price of BTC and macroeconomic fundamentals.

Bitwise puts this situation into perspective with a series of cyclical signals which, according to the report, strengthen the thesis of a largely undervalued BTC. Here are the key elements :

• 66 % undervaluation of BTC relative to global money supply growth, according to their model ;
• Estimated fair value : $270,000, against a current market price well below $100,000 ;
• Expanding global liquidity : more than 320 rate cuts worldwide in two years ;
• The end of the U.S. Federal Reserve’s quantitative tightening (QT) program on December 1st ;
• A $110 billion stimulus in Japan, a resumption of quantitative easing in Canada, and a $1.4 trillion budget plan in China.

According to Bitwise, the absence of a bitcoin market reaction to these factors reflects a rarely seen asymmetric opportunity in the recent history of the asset. The current gap between its price and its theoretical liquidity anchor would represent an upside potential of +194 %, if bitcoin realigns with the implicit levels derived from money supply.

“BTC is historically the most sensitive barometer to monetary dilution due to its absolute scarcity,” the report reminds.

When gold captures flows

From a complementary perspective, some analysts note that Gold has absorbed most of the flows related to fears of monetary dilution this year, to the detriment of bitcoin.

According to Jurrien Timmer, Global Macro Director at Fidelity, “the current Bitcoin trend configuration is lagging behind gold, both in terms of momentum and Sharpe ratio, placing the two assets at opposite extremes.”

This last indicator, which measures risk-adjusted return, clearly shows gold’s outperformance over bitcoin in this monetary cycle phase. Timmer does not talk about an imminent reversal, but about a possible mean reversion configuration, implying this divergence could reverse.

Despite this relative underperformance, Timmer remains cautious about the long-term outlook. He says bitcoin “remains broadly aligned with its long-term adoption curve based on a power law,” while noting that its returns become less explosive as the asset matures.

He even compares it to “an early younger brother of gold, in a maturity phase.” This metaphor illustrates the current perception : an asset that retains its fundamentals but whose market cycles are more complex, less impulsive, and perhaps more institutionalized.

Grayscale predicts peaks for bitcoin as early as 2026. It remains to be seen whether the market will confirm this scenario or extend this wait-and-see cycle. Between perceived undervaluation and persistent uncertainty, BTC remains at a crossroads.

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