Three Factors Driving Bitcoin’s Price

Key Takeaways

• Bitcoin tends to rise when global money supply expands and struggles when liquidity tightens.
• Borrowing and derivatives magnify both rallies and corrections for Bitcoin.
• Network activity and investor behavior provide a pulse on sentiment, helping distinguish healthy accumulation from speculative excess.

Bitcoin’s price can look chaotic from the outside. In reality, it tends to respond to three core forces: global liquidity, leverage in the system, and on-chain fundamentals.

In a recent webinar, VanEck CEO Jan van Eck and Head of Digital Assets Research Matthew Sigel discuss how understanding these drivers can make Bitcoin feel far less mysterious—and much more familiar to anyone who has ever studied macro cycles or market psychology.

Global Liquidity: The Tide That Lifts All Coins

Since 2014, Bitcoin has shown a powerful correlation with global money supply (M2). VanEck’s research finds that changes in M2 explain over half of Bitcoin’s price variance, with the Euro’s M2 supply most strongly aligned to Bitcoin’s trajectory.

BTC Price Changes Correlates Highly with Changes in Global M2

Changes in M2 Explain over 50% of Bitcoin's Price Variance

Source: VanEck Research; Bloomberg. August 2025. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.

Leverage: The Accelerator and the Brake

Leverage acts as Bitcoin’s volume knob. When risk appetite is high, traders and institutions take on leverage through futures, derivatives, ETFs, corporate balance sheets, and even on-chain lending platforms. That leverage can turbocharge rallies—but it can also unwind quickly and aggressively, leading to violent sell-offs.

Importantly, crypto leverage today looks more “professional” than in past cycles, migrating from unregulated crypto lenders to regulated exchanges and ETFs:

• Major exchanges handle derivatives
• ETFs concentrate exposure in regulated channels
• Corporate borrowers have diversified revenue streams
• Miner financing increasingly links to AI infrastructure

Still, Bitcoin’s biggest peaks tend to coincide with periods of speculative enthusiasm and widespread leverage. And its sharpest drawdowns often come when that leverage unwinds just as quickly.

On-Chain Fundamentals: The Network’s Pulse

The blockchain offers a unique window into Bitcoin’s health—real-time digital plumbing you can actually inspect.

Rising activity, healthy transaction levels, and expanding participation generally reinforce long-term strength. So does the share of holders in profit who aren’t rushing for the exits all at once.

But Bitcoin isn’t a Web3 tech growth story. It's more of a monetary ecosystem than a consumer network. Daily users and developer activity matter—but they matter less than global liquidity and market structure.

Instead, one of the most useful on-chain signals is investor behavior. When holders collectively sit on large unrealized gains and sentiment turns euphoric, risk tends to rise. When long-term holders are accumulating quietly, drawdowns often set the stage for future rallies.

Bitcoin (BTC): The first decentralized cryptocurrency, enabling peer-to-peer transactions without intermediaries, secured through a proof-of-work blockchain.