Raoul Pal drew attention to a widely shared chart showing that Bitcoin (BTC) has long moved in parallel with global M2 money supply.
The model in question indicates that Bitcoin's M2 exchanges lag by approximately 12 weeks, and if this correlation continues, it predicted that BTC could reach $200,000 by the end of 2025.
However, Pal argued that this relationship has deteriorated since July 16. While global M2 continues to expand, Bitcoin has remained stable throughout the summer. According to Pal, this is not due to the model losing its validity, but rather the liquidity tightening measures taken by the U.S. Treasury through the Treasury General Account (TGA).
TGA is the account where tax revenues, bond sales, and other cash flows are collected as the main operating account of the U.S. government at the FED, covering federal expenditures. Pal noted that the Treasury has replenished TGA by issuing bonds worth approximately 500 billion dollars since July and raised the balance to about 800 billion dollars, a multi-year high. This liquidity withdrawal has put the most pressure on risky assets, particularly cryptocurrencies.
Pal predicts that TGA has now strengthened sufficiently, and therefore, the liquidity withdrawal will completely end by the end of the month. Thus, he argues that with the return of normal market conditions, Bitcoin could re-enter its M2-focused upward trajectory.
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