The Coming Bitcoin Liquidity Crisis: Why $500K BTC May Be the Floor, Not the Ceiling

Bitcoin's Monetary Singularity. A Stock-to-Flow Analysis of Global Demand, Scarcity, and the Repricing of Risk (2009–2026)Wealth Matters 3.0 Live Coverage From Bitcoin 2025 in Las Vegas

May 27, 2025

Introduction: The End of the Beginning

Bitcoin is no longer an experiment. It is now a macroeconomic signal, one increasingly impossible to ignore, and today kicks off the largest in-person conversation around the topic in Las Vegas at Bitcoin 2025.

From 2009 to 2025, Bitcoin evolved from a peer-to-peer novelty into a sovereign-grade financial instrument, commanding respect from central banks, wealth platforms, corporate treasuries, and increasingly, sovereign states. Today, investors face a binary decision: either understand Bitcoin’s economic implications, or be caught flat-footed as global capital reprices around it.

In today’s post I will do my best to integrate:

The stock-to-flow (S2F) scarcity framework;
Over $600 billion in projected institutional flows through 2026 in a recent report by UTXO;
Bitcoin's 15-year outperformance versus gold;
A rising native yield market (BTCfi);
And Bitcoin’s emerging price alignment with global M2 money supply.

MY conclusion is stark: The only way to clear the growing imbalance between Bitcoin's fixed supply and surging demand is for the price (in fiat-denominated terms) to reprice upward, dramatically and violently, once the tipping point is reached.

1. Stock-to-Flow: The Scarcity Code That Can't Be Ignored

The stock-to-flow model, first popularized by PlanB and used by commodity investors for decades, measures how many years of current production (flow) it would take to replicate the current stock (total supply). Scarce assets, like gold and Bitcoin, have higher S2F ratios and higher valuations when demand rises.

As of mid-2025:

Bitcoin’s stock: ~19.7 million BTC
Annual flow (post-2024 halving): ~164,250 BTC
S2F Ratio: ~120 (higher than gold’s S2F ~60)

This makes Bitcoin the scarcest major monetary asset on Earth.

But scarcity alone isn’t enough. What makes the S2F model so powerful now is that it’s colliding with the biggest demand shock in Bitcoin’s history.

2. Institutional Tsunami: Forecasted Bitcoin Allocations by 2026

A joint May 2025 report by Bitwise and UTXO Management models institutional Bitcoin adoption across five key channels:

Sector USD Inflows BTC Acquired % of Total Supply Nation-States $161.7B 1.617M BTC 7.7% Wealth Platforms $300.0B 3.0M BTC 14.3% Public Companies $117.8B 1.178M BTC 5.6% U.S. States $19.6B 196K BTC 0.93% Sovereign Wealth Funds $7.8B 78K BTC 0.37%

Total: $607 billion in projected demand
Total BTC needed: ~6.07 million
(Assuming static $100,000/BTC—an unrealistic assumption)

Critically, only ~328,500 BTC will be mined from mid-2024 to the end of 2026. That means more than 5.7 million BTC must come from existing holders, who are increasingly long-term, price-insensitive, and yield-focused.

3. Bitcoin in Gold Terms: A Decade of Outperformance

To contextualize Bitcoin’s emerging role as a store of value, we charted the number of ounces of gold required to buy one Bitcoin from 2009 through May 2025.

Key takeaways:

In 2011, 1 BTC was worth less than 1/100th of an ounce of gold.
By 2017, it reached parity (~1 ounce).
In 2021, it breached 25 ounces.
Today, in 2025, 1 BTC = 32 ounces of gold.

That’s a 3200x outperformance over gold in 14 years, with particularly sharp divergence post-2017. In monetary terms, this positions Bitcoin as the new gold standard for performance and scarcity.

4. A New Frontier: The Bitcoin Native Yield Market (BTCfi)

Beyond holding, the next frontier for Bitcoin is productive use.

With institutional allocators now holding BTC on balance sheets, the pressure to generate yield is opening a $100 billion+ opportunity:

BTCfi Use Case Example Yield Risk Level Lending (non-custodial) 2% – 6% Low–Moderate Bridge operator fees 4% – 14% Moderate Liquid staking (BTC rollups) 5% – 12% Moderate–High Options & delta-neutral strategies 6% – 20% Moderate–High

Even with just a 5% utilization rate of Bitcoin's market cap (~$2 trillion), BTCfi could rival the U.S. high-yield bond market in scale.

Early movers in the public market (like Strategy, Metaplanet, and Jack Mallers' TwentyOne) are already optimizing for BTC-native yield as a balance sheet growth strategy.

5. The M2 Money Supply Connection: Bitcoin as a Global Hurdle Rate

If stock-to-flow explains scarcity and BTCfi explains productivity, then macro flows explain adoption, and nothing captures that better than Bitcoin’s increasing correlation to global M2 money supply. For those unfamiliar, M2 is a common way to measure the amount of money circulating in an economy. It includes:

Cash (the physical money in your wallet)
Checking accounts (money you can use with a debit card)
Savings accounts
Money market accounts and small time deposits (like short-term CDs)

In simple terms:

M2 is all the money that people and businesses can access fairly quickly and easily to spend or save. It helps economists understand how much money is available in the system for things like spending, borrowing, or investing.

When M2 grows too fast, it can lead to inflation. When it grows slowly or shrinks, it may signal an economic slowdown

What this chart shows:

Global M2 money supply (white) has exploded, driven by fiscal expansion, currency debasement, and debt monetization.
Bitcoin (orange), while volatile, has tracked this expansion, almost as if it were mirroring a new monetary base layer.
As of Q2 2025, Bitcoin sits just shy of ~$110,000, on a near-perfect vector with M2.

This alignment supports the idea that Bitcoin is becoming a monetary hedge against the dilution of fiat M2. If global liquidity keeps rising, Bitcoin could emerge as the “asset of last resort” for central banks and sovereign entities looking to hedge against fiat erosion.

6. Sovereigns and States: The Political Adoption Curve

With the U.S. Strategic Bitcoin Reserve (198,000 BTC) now law, and Senator Lummis’ BITCOIN Act proposing 1 million BTC over 5 years, the U.S. is not just tolerating Bitcoin—it is strategizing around it.

Likewise:

20+ U.S. states are drafting legislation to acquire Bitcoin (New Hampshire and Arizona have already passed laws).
El Salvador, Bhutan, UAE, and even North Korea are confirmed holders.
IMF member nations are studying gold-for-BTC swap models to hedge reserves.

These structural changes create a non-speculative bid for Bitcoin—a persistent, price-insensitive buyer base that puts a floor under the market.

7. S2F Demand Shock + Institutional Liquidity Crunch = Repricing

Here’s where theory meets math.

If the institutional forecast of ~$600B comes true, and Bitcoin stays below $150K, demand will far outstrip supply. Long-term holders won't sell. Only one variable can move: price.

These are price floors based on liquidity needs. Reflexivity, media narratives, and sovereign game theory could take prices much higher.

8. Strategic Implications for Investors and Institutions

If Bitcoin becomes the new global reserve asset:

Cash and bonds underperform due to real yield suppression.
Gold maintains purchasing power, but lacks upside.
Bitcoin compounds yield + appreciation, with built-in scarcity, programmability, and liquidity.

Portfolio Implications

Bitcoin is no longer just part of the “alternatives” bucket. In a hyperbitcoinizing world, everything else becomes the alternative.

Bitcoin as the Eye of the Global Repricing Storm

The convergence of:

Scarcity (S2F over 100),
Institutional demand ($600B+),
Yield generation (BTCfi),
Sovereign adoption (US, El Salvador, 20+ states),
And fiat dilution (M2 expansion)

...sets the stage for what may be the most significant financial repricing event of our lifetimes.

By the end of 2026, Bitcoin could conservatively reach $250,000–$500,000. But more importantly, its role in capital markets, national treasuries, and institutional portfolios will be solidified.

We’re not just watching a price chart. We’re witnessing the reconstruction of the global financial operating system.

Yours in health and wealth,

~Chris J Snook

P.S. Today marks the start of Wealth Matters 3.0 coverage and commentary from the largest gathering of eclectic minds from around the world in Las Vegas for the Bitcoin 2025 Conference. If you want to tune in to the livestreams online, you can do so below before diving into today’s post.

Sources:

Bitcoin’s Price History – Investopedia
Comprehensive overview of Bitcoin’s price evolution since inception.
Historical Gold Prices – Macrotrends
Long-term chart of gold prices, used to calculate BTC/gold ratios.
Bitcoin Price Charts – Bitbo
Live and historical Bitcoin pricing data with halving timelines.
BitcoinTreasuries.net – Corporate BTC Holdings
Database of public companies and governments holding BTC.
Galaxy Digital: Bitcoin Layer 2 Report
Research on Bitcoin's scaling via Layer 2 solutions and future DeFi infrastructure.
BITCOIN Act of 2025 – Full Bill Text
Senator Lummis’ legislative proposal for the U.S. Strategic Bitcoin Reserve.
Strategic Bitcoin Reserve Executive Order – WhiteHouse.gov
Official U.S. government policy establishing long-term sovereign BTC holdings.
BCG Global Wealth Report 2024
Used for modeling total addressable assets from wealth management platforms.
Forecasting Institutional Flows to Bitcoin – Bitwise & UTXO (PDF)
Main reference report projecting $607B in institutional Bitcoin demand.
Bitcoin Price vs Global M2 Money Supply – Chart via TradingView
Used for visualizing the monetary expansion alignment with BTC price action.