Raoul Pal, founder of Global Macro Investor, has drawn attention to a broad circulated chart comparing Bitcoin’s (BTC) movements with global M2 money.
The diagram shows that since the beginning of 2023, Bitcoin has tended to trace the global M2 money amount with a consistent 12-week delay, suggesting that changes in liquidity conditions filter through to crypto markets with a three-month delay.
Based on this model, Bitcoin would still be about to approach $ 200,000 by the end of 2025 if the context was to hold.
Since July 16, however, this relationship has broken down. While Global M2 has continued to trend higher, which reflects the ongoing monetary expansion globally, Bitcoin has stopped and moves sideways throughout the summer despite its historically tight connection to liquidity.
TGA Refill plays spoilsport
Pal claims that the break is not a failure in the model, but rather the result of the actions of the US Treasury through his Treasury Account (TGA). TGA is the government’s operating account in the Federal Reserve, which is used to receive taxes, the proceeds on bond sales and other influxes, while also financing federal expenses.
When the Treasury tries to rebuild this account by issuing more bonds than necessary to cover immediate obligations, it effectively drains the liquidity from the system, reducing the capital available to risk assets. According to PAL, the Treasury has issued approx. $ 500 billion in bonds to refill TGA and push its balance near $ 800 billion, a multi -year high.
This large cash withdrawal has hit liquidity-sensitive assets like crypto the most difficult, which explains Bitcoin’s sideways action despite rising M2.
It is important that PAL believes that TGA is now sufficiently refilled, which means that the liquidity drain is likely to be over and should fade completely at the end of the month. If this happens, liquidity conditions are normalized and Bitcoin’s Braoder-rally can be resumed after its M2-driven track upwards.
To counter PAL’s argument, however, it is worth noting that tech shares and gold have continued to set new all-time highs, suggesting that wider risk appetite remains intact.
While the TGA refill may have weighed heavily on crypto, the sharper impact could also reflect a strong sales pressure from long-lasting coins, which helps explain the deviation between Bitcoin and Global M2.
