U.S. Treasury TGA Refill Caused Bitcoin's Break From Global M2 Correlation, Says Raoul Pal | BTC Price Analysis

Raoul Pal, the founder of Global Macro Investor, has highlighted a popular chart analyzing Bitcoin's (BTC) price movements against the global M2 money supply. This analysis revealed that since early 2023, Bitcoin's price has closely followed the global M2 trend with a consistent 12-week lag, suggesting liquidity changes impact crypto markets after a three-month delay. According to this model, BTC could still target $200,000 by the end of 2025 if the correlation holds. However, this relationship diverged starting July 16th. While global M2 continued its upward trajectory, indicating ongoing monetary expansion, Bitcoin's price stalled and moved sideways throughout the summer, breaking its historical link with liquidity. Pal attributes this breakdown not to a model failure but to specific actions by the U.S. Treasury. The Treasury General Account (TGA), the government's operational account at the Federal Reserve, was significantly replenished. To rebuild the TGA balance to a multi-year high near $800 billion, the Treasury issued approximately $500 billion in bonds since July. This large-scale bond issuance effectively drained liquidity from the financial system, reducing capital available for risk assets like cryptocurrency. Consequently, Bitcoin's price action decoupled from the rising M2. Crucially, Pal believes the TGA replenishment phase is now complete, and the liquidity drain is likely over, potentially fading entirely by month's end. This normalization could allow Bitcoin's broader rally to resume, realigning with its M2-driven trajectory. It's important to note a counterargument: despite the pressure on crypto, technology stocks and gold have reached new all-time highs, indicating that overall risk appetite remains strong. The sharper impact on Bitcoin may also reflect significant selling pressure from long-term holders, further explaining its deviation from global M2 trends.