U.S. Treasury Action to Blame for Bitcoin’s Break From Global M2, Raoul Pal Says

Bitcoin just decoupled from traditional monetary systems—and Raoul Pal points the finger squarely at Washington.

The Global Macro Investor CEO claims Treasury Department maneuvers triggered crypto's independence day from global money supply metrics.

Policy Domino Effect

Pal argues recent Treasury actions created a perfect storm. Bond market interventions combined with dollar policy shifts forced Bitcoin to chart its own course.

The divergence signals crypto's maturation as an asset class that no longer dances to central bankers' tunes.

Market Realities

While traditional economists fret about the uncoupling, crypto natives see validation. Digital assets finally behaving like what they promised—sovereign value systems immune to political whims.

Another case of regulators creating the very monster they feared—the irony's thicker than a banker's bonus.

TGA refill plays spoilsport

Pal argues that the break is not a failure of the model but rather the result of actions by the U.S. Treasury through its Treasury General Account (TGA). The TGA is the government’s operating account at the Federal Reserve, used to receive taxes, bond sale proceeds, and other inflows while also funding federal expenditures.

When the Treasury seeks to rebuild this account by issuing more bonds than needed to cover immediate obligations, it effectively drains liquidity from the system, reducing the pool of capital available to risk assets. According to Pal, since July, the Treasury has issued about $500 billion in bonds to replenish the TGA, pushing its balance NEAR $800 billion, a multi-year high.

This large-scale withdrawal of cash has hit liquidity-sensitive assets like crypto the hardest, explaining bitcoin’s sideways action despite rising M2.

Importantly, Pal believes the TGA is now sufficiently replenished, meaning the liquidity drain is likely over and should fade completely by the end of the month. If that happens, liquidity conditions will normalize, and bitcoin's braoder rally could resume following its M2-driven trajectory upward.

However, to counter Pal’s argument, it is worth noting that tech stocks and Gold have continued to set new all-time highs, suggesting that broader risk appetite remains intact.

While the TGA replenishment may have weighed heavily on crypto, the sharper impact could also reflect heavy selling pressure from long-held coins, which helps explain the deviation between bitcoin and global M2.