U.S. Treasury Actions Driving Bitcoin Away From Global M2, Analyst Raoul Pal Notes

Bitcoin’s recent stagnation relative to global money supply may reflect both large-scale selling of long-held coins and unusual liquidity dynamics.

Raoul Pal, founder of Global Macro Investor, highlighted a chart tracking bitcoin’s (BTC) price against global M2 money supply. Since early 2023, bitcoin has historically followed M2 trends with a roughly 12-week lag, suggesting that shifts in global liquidity take about three months to reach crypto markets.

Based on this historical pattern, bitcoin would still be on track to approach $200,000 by the end of 2025. Yet, since 16 July, this relationship has faltered. Despite M2 continuing its upward trajectory, bitcoin has largely traded sideways over the summer, breaking its usual connection to liquidity.

Treasury General Account Replenishment Impacts Crypto

Pal attributes the deviation not to a flaw in the model but to U.S. Treasury activity. The Treasury has been rebuilding its Treasury General Account (TGA)—the government’s operating account at the Federal Reserve—by issuing more bonds than necessary to cover immediate obligations.

Since July, roughly $500 billion in bonds have been issued to refill the TGA, raising its balance to nearly $800 billion, a multi-year peak. This substantial withdrawal of cash reduced liquidity in the broader system, putting pressure on risk-sensitive assets such as bitcoin.

Pal suggests the TGA is now largely replenished, and the liquidity drain should subside by the end of the month. With liquidity conditions normalizing, bitcoin could resume its historically M2-driven upward trajectory.

Market Resilience and Selling Pressure

However, other risk markets tell a different story. Tech stocks and gold continue to reach new highs, signaling that broad risk appetite remains intact. While TGA activity has clearly influenced crypto, significant selling from long-term holders may also explain bitcoin’s sharper divergence from global M2 trends.