Bitcoin’s recent underperformance relative to global money supply may be partly due to large-scale selling of long-held coins, contributing to its divergence from the broader M2 trend.
Raoul Pal, founder of Global Macro Investor, highlighted a widely shared chart comparing bitcoin’s (BTC) price movements with global M2 money supply. The data indicates that since early 2023, bitcoin has generally mirrored changes in M2 with a roughly 12-week lag, suggesting that shifts in global liquidity typically take about three months to filter into the crypto market.
If this historical correlation had continued, bitcoin would still be on pace to approach $200,000 by the end of 2025. However, the relationship began breaking down around 16 July. Despite ongoing growth in global M2, bitcoin has largely moved sideways through the summer, diverging from its usual link to liquidity.
Treasury General Account Refill Disrupts Liquidity
Pal attributes this breakdown not to the failure of the model but to U.S. Treasury activity. Specifically, the Treasury has been rebuilding its Treasury General Account (TGA)—its operating account at the Federal Reserve—by issuing bonds in excess of immediate funding needs.
Since July, the Treasury has reportedly issued around $500 billion in bonds to refill the TGA, bringing its balance close to $800 billion, a multi-year high. This massive withdrawal of cash has reduced the liquidity available to risk assets, hitting crypto markets particularly hard and explaining bitcoin’s stagnant price action despite rising M2.
Pal notes that the TGA is now largely replenished, and the liquidity drain should dissipate by the end of September. Once liquidity conditions normalize, bitcoin could potentially resume its M2-driven upward trajectory.
Counterpoints: Broader Market Resilience
Yet, other markets tell a slightly different story. Tech stocks and gold have continued to set new all-time highs, suggesting that overall risk appetite remains robust. While TGA-related liquidity constraints may have weighed on crypto, the sharper impact on bitcoin could also stem from heavy selling of long-held coins, amplifying the divergence from global M2 trends.
