- The U.S. M2 money supply reached a record $22.02 trillion, while cryptocurrency markets continued to decline.
- Most new liquidity is staying in money markets and short-term Treasuries instead of going into riskier assets like crypto.
- High leverage in altcoins has caused forced selling and increased short-term volatility in the crypto market.
- Key cryptocurrencies, including Bitcoin, Ethereum, and Solana, saw notable price declines in recent days.
- Experts suggest the drop may be a temporary correction, with overall long-term market trends still unchanged.
The M2 money supply in the United States rose to a record $22.02 trillion in June, at the same time that cryptocurrency markets continued to fall. Despite this increase in available cash, digital asset prices dropped rather than climbing alongside the liquidity boost.
According to the Kobeissi Letter in a tweet, M2—which measures the total amount of cash, checking deposits, and savings available—grew by 4.5% year-over-year. Instead of entering riskier investments like cryptocurrency, most of this money remains in low-risk options such as money market funds or short-duration U.S. Treasuries.
Derek Lim, head of research at Caladan, described this situation as “liquidity pooled, not deployed.” He explained that this capital is “dry powder” on the sidelines, waiting for more favorable conditions before moving into volatile assets. Although it’s common for Bitcoin and the overall crypto market to track increases in M2, the total cryptocurrency market value has shrunk by $117 billion since Wednesday, down from its recent peak of $4.05 trillion.
Analysts attribute this trend to a mix of profit-taking, market fatigue, and high leverage in the system—especially in altcoins. Daniel Liu, CEO of Republic Technologies, told Decrypt that “small price shifts can now trigger cascading liquidations or short squeezes depending on the direction.” A cascading liquidation happens when forced selling sets off more selling, while a short squeeze quickly drives up prices and causes traders betting against the asset to buy back in.
High levels of leverage, particularly in assets like XRP, have caused sizable forced liquidations. Caladan’s Lim noted that XRP saw an “$89 million long liquidation” in one day. He added, “even with loose liquidity, risk sentiment is cooling… traders are likely waiting for clarity before putting their money back to work.”
Major cryptocurrencies have seen price falls: Bitcoin dropped 3% from its recent high, while Ethereum, Solana, and XRP dropped 4.8%, 6.2%, and 7.1% respectively, according to CoinGecko.
Liu said Ethereum faces “$260 million in ask-side supply,” making it harder for prices to move above $4,000 without more buying. He also noted, “profit-taking continues,” while Solana appears more at risk for liquidations as leverage outpaces demand.
Lim described the current situation as a “healthy correction” and not a sign of a major market breakdown. Liu added that the market is coming off a “massive price rally” and needs time to consolidate, saying, “the long-term thesis remains intact.”
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