Liquidity Trumps Tariffs: Why Global M2 Will Drive Crypto This Summer

By Jake Ryan | CIO, Tradecraft Capital

Thesis:

While political headlines fixate on trade wars and tariffs, the dominant force driving markets – especially crypto – is global liquidity. More specifically, the surge in Global M2 money supply is setting the stage for a strong summer rally in risk assets.

Backdrop:

Historically, the Bitcoin 4-year cycle tied to halving events was seen as the primary catalyst for crypto bull markets. But 2024 has deviated from that script. Post-halving price action has been muted, and the macro environment – anchored by sovereign debt cycles and central bank liquidity – offers a better framework.

The Key Shift:

In Q1 2025 alone, $5 trillion was added to global M2, an unprecedented injection of liquidity. This surge isn’t coincidental – it aligns with the need to roll over massive piles of sovereign debt globally. As U.S. Treasuries mature, central banks inject capital to stabilize funding markets. That liquidity ultimately finds its way into risk assets.

Analysis:

• Tariffs are short-term, sector-specific shocks. They disrupt trade flows and stir headlines but don’t move multi-trillion-dollar asset classes over quarters or years.
• Liquidity is the rising tide. It lifts equities, crypto and other duration-sensitive assets. It’s fungible, relentless, and politically agnostic.
• We’re transitioning from the Age of Information to the Age of Autonomy, where AI, agents and crypto rails interact autonomously. This transformation will require liquidity to fund innovation and speculation.

Implication for Crypto Investors:

Expect tailwinds for crypto through summer 2025. Bitcoin and Ethereum are likely to continue grinding higher, and AI, DePIN and DeFi sectors should benefit most. Market dips tied to political noise – like tariffs – should be viewed as buying opportunities within this larger liquidity-led cycle.

In fact, event risk may actually be to the upside for crypto as more of the trade deals get done with countries and regions like the EU who recently closed a tariff deal with the U.S. But most importantly, it’s the expansion of global liquidity that’s the primary driver of risk asset prices tracking higher.

As you can see below, bitcoin (white) follows Global M2 Liquidity, delayed 90 days (yellow).

The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the position of DACFP or its affiliates. This content is provided for educational and informational purposes only and does not constitute investment, financial, legal, tax, or accounting advice, nor an offer, solicitation, or recommendation to buy or sell any security or other asset. Information is current as of the date of publication and may become outdated; no representation is made as to its accuracy or completeness. Publication does not constitute an endorsement of the author, the author’s firm, or any product or service referenced, and the author may hold positions in the assets discussed. Readers should consult their own qualified professionals before making any financial decisions.