Bitcoin’s (BTC) recent decoupling from global M2 money supply may be largely driven by U.S. Treasury activity and long-held coin selling, according to Raoul Pal, founder of Global Macro Investor.

Pal highlighted a widely circulated chart showing that Bitcoin historically tracks global M2 with a 12-week lag, meaning shifts in liquidity conditions typically influence crypto markets with a three-month delay. Based on this relationship, BTC would still be on track to approach $200,000 by the end of 2025—if the correlation held.

However, since July 16, this pattern has broken down. While global M2 continues to trend higher, reflecting ongoing monetary expansion, Bitcoin has stalled, trading sideways through the summer despite its historically close connection to liquidity.

Treasury General Account Refill Impact

Pal attributes the divergence not to a model failure, but to the U.S. Treasury’s replenishment of its Treasury General Account (TGA). The TGA, the government’s operating account at the Federal Reserve, collects taxes, bond sale proceeds, and other inflows while funding federal expenditures.

To rebuild the TGA, the Treasury issued roughly $500 billion in bonds, pushing the balance to nearly $800 billion, a multi-year high. This large-scale withdrawal of cash drained liquidity from the system, reducing capital available to risk assets such as Bitcoin.

According to Pal, this liquidity drain is likely ending by the close of September, which could allow BTC to resume a broader rally aligned with its historical M2 trajectory.

Additional Factors: Long-Held Coin Selling

The sharper impact on Bitcoin may also reflect heavy selling from long-held coins, further contributing to the deviation from global M2 trends. While the TGA explanation accounts for much of the liquidity squeeze, these sales may have amplified downward pressure on BTC.

It’s worth noting that other risk assets, including tech stocks and gold, have continued to hit new all-time highs, suggesting that broader investor appetite remains strong despite the temporary liquidity drain in crypto markets.

In summary, Bitcoin’s recent sideways movement reflects a combination of Treasury-driven liquidity withdrawals and concentrated selling pressure, rather than a fundamental breakdown in its historical correlation with global M2.