Bitcoin's Correlation with Global M2 Supply Faces Disruption

According to PANews, Global Macro Investor founder Raoul Pal has observed a notable shift in the correlation between Bitcoin's price movements and the global M2 money supply. Since the beginning of 2023, Bitcoin's price has shown a lagging correlation of approximately 12 weeks with global M2, indicating that liquidity takes about three months to impact the cryptocurrency market. However, this pattern has changed since July 16. Despite the continued expansion of global M2, Bitcoin has remained in a sideways trading pattern. Pal attributes this divergence to the U.S. Treasury's liquidity withdrawal through the Treasury General Account (TGA). Since July, the U.S. Treasury has issued around $500 billion in bonds to replenish the TGA, raising its balance to nearly $800 billion. This action has reduced available market funds, directly affecting liquidity-sensitive assets like Bitcoin. Pal suggests that the TGA account is now nearing its target level, and the liquidity withdrawal effect may dissipate by the end of the month. This could potentially allow Bitcoin to resume its upward trend in sync with the M2 supply. Meanwhile, technology stocks and gold continue to reach new highs, indicating that overall risk appetite remains largely unaffected. Additionally, the selling pressure from long-term holders might also be contributing to the divergence between Bitcoin and the M2 supply.