Raoul Pal Links Bitcoin’s Stagnation to U.S. Treasury Actions
- Since early 2023, bitcoin has tracked global M2 money supply with a consistent lag of approximately 12 weeks.
- As of July, the correlation between bitcoin and M2 broke down, with bitcoin moving sideways while M2 continued to rise.
- The U.S. Treasury issued around $500 billion in bonds since July to replenish its Treasury General Account (TGA), affecting liquidity.
- The TGA balance has reached nearly $800 billion, a multi-year high, indicating significant cash withdrawal from the market.
- Pal suggests that liquidity conditions may normalize by the end of the month as TGA replenishment concludes.
The breakdown in bitcoin’s relationship with global M2 is attributed to actions by the U.S. Treasury, which have drained liquidity from risk assets like crypto. Despite this, tech stocks and gold continue to perform well, indicating a broader risk appetite remains intact.
If liquidity conditions normalize as expected, it could lead to a resumption of bitcoin’s upward trajectory linked to M2 trends.(Source)
