Bitcoin Breaks From Global M2 Trends, Blame Placed on U.S. Treasury, Says Raoul Pal

Bitcoin’s recent price stagnation, despite rising global liquidity, appears to be influenced by a combination of U.S. Treasury activity and heavy selling of long-held coins.

Raoul Pal, founder of Global Macro Investor, highlighted a chart comparing bitcoin’s (BTC) movements with global M2 money supply. Historically, since early 2023, bitcoin has tracked M2 with roughly a 12-week lag, suggesting that shifts in liquidity conditions typically take about three months to affect crypto markets.

Based on this pattern, bitcoin could still be on track to approach $200,000 by the end of 2025. However, since 16 July, the correlation has broken down. While global M2 continues to trend upward, bitcoin has largely traded sideways through the summer, diverging from its usual connection to liquidity.

Treasury General Account Refill Impacts Crypto

Pal attributes this deviation not to a failure of the model but to the U.S. Treasury’s actions. To rebuild its Treasury General Account (TGA)—the government’s operating account at the Federal Reserve—the Treasury has issued more bonds than necessary to cover immediate obligations.

Since July, about $500 billion in bonds have been issued, raising the TGA balance to nearly $800 billion, a multi-year high. This massive withdrawal of cash has reduced liquidity in the system, putting pressure on risk-sensitive assets like bitcoin.

Pal expects the TGA to be fully replenished by the end of September. Once liquidity pressures ease, bitcoin could resume its historically M2-driven upward trajectory.

Market Resilience and Selling Pressure

Despite bitcoin’s stagnation, tech stocks and gold continue to hit record highs, indicating that overall risk appetite remains strong. The sharper impact on bitcoin may also reflect significant selling from long-term holders, helping to explain the divergence between bitcoin and global M2 trends.

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