Impact of Global Money Supply on Bitcoin Price: An Econometric Analysis

In recent years, Bitcoin has evolved from a niche digital asset to a global financial phenomenon. But what really drives its price? My research investigates one key question: Does the global expansion of money supply influence Bitcoin’s price — and if so, how long does it take for that impact to show up?

Why This Matters

Bitcoin is often called “digital gold,” but it’s still unclear whether it behaves more like a hedge against inflation or like a risky stock. While past studies have mostly focused on U.S. money supply, Bitcoin is a global asset. I wanted to dig deeper — using M2 money supply data from 21 major economies — to find out if global liquidity is a key factor behind Bitcoin price movements.

Methodology

The main variable I focused on was the price of Bitcoin in USD from May 2013 to April 2025. I compared this with the global M2 money supply (source: bgeometrics), and controlled by Price of Gold, A Global Stock Index (using proxy MSCI ACWI) and Global Economic Policy Uncertainty (EPU) index.

The method chosen is Multivariable Regression Model using Ordinary Least Squares (OLS) to measure how Bitcoin’s monthly price changes respond to money supply and the control variables — especially looking at the impact of delayed effects.

$$\begin{align*} \text{BTC_Price}_t &= \alpha + \sum_{i=1}^{4} \beta_{i} \text{Global_M2}_{t-i} + \beta_5 \text{Gold_Price}_t \\ &\quad + \beta_6 \text{Global_Stock_Index}_t + \beta_7 \text{Global_EPU}_t + \varepsilon_t \end{align*}$$

Key Findings

1) Global money supply affects Bitcoin price — but with a 4-month delay.

• A 1% increase in global M2 leads to a 6.28% increase in Bitcoin price after 4 months, on average.

• The effect was not immediate in earlier lags.

2) Bitcoin behaves more like a “risk-on” asset, meaning it rises when stock markets do.

• The Global Stock Index had a strong positive influence on Bitcoin price.

• Economic uncertainty (EPU) also pushes Bitcoin prices up, supporting the idea that Bitcoin is a hedge against institutional or policy instability.

• Gold Prices had no significant impact on Bitcoin in this model, suggesting they may not move in the same direction as often assumed.

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