Bitcoin's 66% Undervaluation vs. Global Money Supply and Its Implications for 2026

The global financial landscape in 2025 is defined by a paradox: while central banks have expanded the global M2 money supply to a record $142 trillion-a 9.1% year-to-date increase-Bitcoin remains stubbornly undervalued relative to this liquidity surge. According to a report by Bitwise Asset Management, Bitcoin is currently trading at a 66% discount to its fair value as implied by cointegration models tied to global M2 money supply. This valuation gap, if closed, could propel Bitcoin to $270,000 by 2026, creating an asymmetric macro-driven investment opportunity with limited downside and outsized upside potential.

The Macroeconomic Case for Bitcoin's Undervaluation

Bitcoin's price dynamics are increasingly intertwined with global liquidity metrics. Research from Fidelity Digital Assets underscores that Bitcoin functions as a "leading macro asset," with its price exhibiting strong correlations to broad money supply measures like M2. As of Q3 2025, the global M2 money supply has grown at a compound annual rate of 7.0% since 2000, far outpacing Bitcoin's supply growth of 0.5% annually. This divergence suggests that Bitcoin's market capitalization has not yet absorbed the full impact of monetary expansion, particularly in economies like China ($47.1 trillion M2) and the U.S. ($22.2 trillion M2).

Bitwise's analysis highlights a critical mismatch: while global liquidity has surged due to fiscal and monetary stimulus in major economies, Bitcoin's price has lagged. The firm estimates that Bitcoin's fair value, if aligned with the $137 trillion global M2 money supply, should be approximately $270,000-a 194% increase from its current price. This discrepancy is further amplified by gold's overvaluation. Gold, traditionally a store of value, is currently trading at a 75% premium to global liquidity metrics, creating a mean-reversion scenario where Bitcoin could outperform.

Energy-Based Valuation and Institutional Validation

Beyond liquidity metrics, Bitcoin's intrinsic value is supported by energy-based models. Capriole Investments calculates a fair value of $175,400 by analyzing the energy costs of mining, hardware expenses, and the protocol's supply growth rate. This model assumes that Bitcoin's self-adjusting mining difficulty ensures energy input converges with price over time, reinforcing the argument that the current price is below intrinsic value. Meanwhile, JPMorgan's volatility-adjusted comparison to gold suggests a $170,000 price target, with the firm noting reduced speculative trading activity and improved market stability as tailwinds.

These methodologies converge on a common theme: Bitcoin's price is disconnected from its cost of production and its role as a hedge against monetary inflation. As of July 2025, Bitcoin reached $119,000 amid a broader crypto bull run, yet its valuation remains anchored to a fraction of its potential given institutional adoption and regulatory clarity.

Implications for 2026: A Macro-Driven Asymmetric Opportunity

The 66% undervaluation of Bitcoin presents a compelling case for investors seeking asymmetric risk-reward profiles. If global liquidity continues to expand-a near-certainty given central bank policies-Bitcoin's price could close the valuation gap through a combination of increased adoption and market re-rating. Bitwise's long-term capital market assumptions project a $1.3 million price target by 2035, underpinned by a 28.3% compound annual growth rate. For 2026, this trajectory implies a potential 150%+ return from current levels.

The asymmetry lies in Bitcoin's structural properties. Unlike fiat currencies or gold, Bitcoin's supply is capped at 21 million, making it inherently scarce in a world of expanding money supply. As global M2 grows, the relative scarcity of Bitcoin could drive demand, particularly from institutional investors allocating 1%–5% of portfolios to the asset class. Additionally, Bitcoin's correlation to U.S. stocks (0.39) suggests it could serve as a diversification tool in portfolios exposed to equity market volatility.

Risks and Counterarguments

Critics argue that Bitcoin's volatility and regulatory uncertainty could delay a re-rating. However, the 2025 bull run demonstrates growing institutional confidence, with major banks like JPMorgan and Fidelity integrating Bitcoin into their investment frameworks. Regulatory clarity, particularly in the U.S. and EU, is also advancing, with 2026 likely to see the approval of spot Bitcoin ETFs-a catalyst that could accelerate adoption.

Moreover, Bitcoin's energy-based valuation model assumes stable electricity and hardware costs, which could be disrupted by geopolitical or technological shifts. Yet, the protocol's self-adjusting difficulty mechanism inherently stabilizes these inputs over time, reinforcing its long-term value proposition.

Conclusion

Bitcoin's 66% undervaluation relative to global M2 money supply represents a rare macro-driven investment opportunity. With a fair value of $270,000 implied by liquidity metrics and $170,000–$175,400 supported by energy-based and gold-comparison models, the asset is poised to outperform traditional stores of value in 2026. For investors seeking asymmetric returns, Bitcoin's structural scarcity, institutional adoption, and alignment with monetary trends make it a compelling bet in an era of unprecedented liquidity expansion.