Raulpal criticizes Bitcoin’s departure from global M2 US financial measures

Raoul Pal, founder of Global Macro Investor, has turned his attention to the widely distributed charts comparing Bitcoin (BTC) movement with Global M2 Money Supply.

The chart has been in the process of Bitcoin tracking global M2 money supply with a consistent 12-week delay since early 2023, meaning changes in liquidity conditions will filter the crypto market that is three months behind.

Based on that model, Bitcoin is on track to approach $200,000 by the end of 2025 if the correlation is retained.

However, since July 16th, the relationship has collapsed. Global M2 continues to maintain a higher trend, reflecting on the global ongoing financial expansion, but Bitcoin has moved sideways through the summer despite historically tough links to liquidity.

TGA replenishment plays SPAILSPORT

PAL argues that the break is not a failure of the model, but a result of actions by the US Treasury Department’s General Account (TGA). The TGA is a government-operated account of the Federal Reserve, used to receive taxes, bond sales revenues and other inflows, and also funds federal spending.

If the Treasury is aiming to restructure this account by issuing more bonds than necessary to cover immediate obligations, it effectively emits liquidity from the system and reduces the capital pool that can be used for asset risk. According to PAL, since July, the Treasury has issued about $500 billion in bonds to fill up its TGA, boosting its balance to a multi-year high of nearly $800 billion.

This massive withdrawal of cash collides with liquidity-sensitive assets like Crypto, explaining Bitcoin’s sideways behavior despite M2 rising.

Importantly, PAL believes that it has been fully replenished with TGA. This means that the fluid drainage is likely to have ended and must be fully faded by the end of the month. Once that happens, the liquidity conditions are normal and Bitcoin’s Braodalury can resume upward following the M2-driven trajectory.

However, it is noteworthy that tech stocks and gold continue to set record highs to counter the PAL debate, suggesting that the broader risk appetite remains unharmed.

Although TGA refills may be much heavier on the crypto, the sharper shock may also reflect sales pressure from longer coins, which will help explain the deviation between Bitcoin and the global M2.