The conditions for a surge in the cryptocurrency market before 2026 have already formed: Can the global M2 hitting a new high turn the tide?

A Confusing Paradox: Liquidity Abundant, Crypto Still Falling

The global liquidity environment is improving, but the cryptocurrency market is shrinking — this is the most ironic phenomenon of the moment. According to Alphractal data, the global M2 money supply has reached a historic high, approaching $130 trillion. Meanwhile, the total market capitalization of crypto assets in Q4 2025 has actually decreased by 21%, far below the peak in Q3.

What does this mismatch mean? Simply put, although global central banks and governments are releasing liquidity, investor fear has not yet been eliminated. However, this situation may be brewing a rebound.

China’s M2 Expansion Is the Core Driver of Global Liquidity

Among the global $130 trillion M2, China contributes an astonishing 37% — about $47.7 trillion. This is not just a numerical issue but also reflects the power dynamics of the global economy.

China’s aggressive monetary policy is spreading worldwide. In contrast, economies like Japan, India, and South Korea are experiencing M2 contraction. This unbalanced expansion is creating arbitrage opportunities and cross-border capital flows. Where will they ultimately flow? The answer is likely to risk assets, including cryptocurrencies.

The $4 billion liquidity injection plan by the U.S. Treasury further confirms this trend: major global economies are competing to release liquidity, laying the groundwork for a risk asset rebound in 2026.

Why Has the Liquidity Rebound Not Saved the Crypto Market Yet?

Three rate cuts, record-high global M2, U.S. fiscal stimulus — all should have propelled crypto market surges. But the reality is that the crypto market is still oscillating at low levels.

There are two reasons:

First, regulatory uncertainty. Even with ample liquidity, if policy signals are unclear, institutional investors will remain on the sidelines.

Second, profit-taking psychology. The rally at the end of 2024 has locked in profits for many investors, who now prefer to wait for clearer signals before re-entering.

This waiting may not last long. As global M2 continues to expand and the Fed’s rate-cut cycle persists, suppressed demand will eventually be unleashed.

Key Question for 2026: How Long Will the Recovery Take?

Market analysts predict that if global liquidity continues to expand, the crypto market could see a 20-30% rebound within the next 12 months. This forecast is based on historical cycle patterns: whenever global M2 rises sharply, risk assets tend to follow suit.

But the speed depends on the recovery of investor confidence. The current situation is very similar to early 2023 — macro environment improving, but market psychology still needs time to adjust.

Three Signals to Watch

1. China’s subsequent stimulus policies — as long as China continues expanding M2, global liquidity will not dry up.
2. The pace of Fed rate cuts — further rate cuts will accelerate capital inflows into risk assets.
3. Technical reversal in the crypto market — when trading volume begins to align with rising prices, the rebound truly starts.

Bottom Line

The rise in global liquidity, record-high M2, and policy support are all paving the way for the recovery of the crypto market. The decline in Q4 2025 is not the end but may be a lull before another surge. Investors now face the choice of continuing to wait for confirmation or positioning early. In any case, the power of liquidity will ultimately speak.