The macro conditions suggest that Bitcoin (BTC) could face a multi-week slowdown in performance if global M2 money supply peaks in September. Recent Reports By Delphi Digital.
The BTC-M2 relationship using a 10-week offset indicates that M2 data is already above about 8% from the predicted September high.
Bitcoin has historically tracked the M2 peak in performance lags, especially when combined with large financial issuances that remove liquidity from the financial system.
It appears the Treasury is ready to start withdrawing cash from the market within weeks to rebuild its general account (TGA) in the Federal Reserve System.
The Treasury’s third quarter borrowing forecast, released on July 29, forecasts net market debt of more than $1 trillion per quarter. This amount reflects a weaker starting balance and cash inflow than expected, with $457 billion.
Fluid drains behave differently from previous cycles due to the depletion of absorption buffer.
The Federal Reserve Reverse Repo facility eased 2023 replenishment with excess cash in excess in 2023, holding just $28.8 billion in mid-August.
The Fed continues to tighten quantitatively at $60 billion a month, but foreign Treasury buyers have retreated significantly, forcing the domestic market to absorb the impact on full issuance.
Stablecoin contraction signal Bitcoin vulnerability
The report noted that TGA supplementation in 2023 demonstrated Bitcoin’s sensitivity to Treasury-led liquidity removal.
Stablecoin Supply signed $5.15 billion as the Treasury restructured $550 billion between June and August 2023. At the same time, Bitcoin has ended its essentially unchanged period.
Stable contraction preceded the stagnation of the crypto market as few dollars circulated through chain rails. Stablecoins currently holds more than $120 billion in Treasury debt, making it both a liquidity gauge and an absorption mechanism.
When the Treasury withdraws cash for replenishment, Stablecoin issuers face redemption pressures that directly affect the liquidity conditions of the crypto.
The report highlighted that the upcoming cycle faces weaker structural support than in 2023, with the bank’s balance sheet being constrained by a loss of $482 billion in unrealized securities losses and a decline in foreign demand.
Additionally, China and Japan have reduced Treasury holdings by more than $400 billion since 2021, allowing domestic players to absorb heavier issuance volumes.
The potential September peak of the M2, combined with accelerated Treasury issuance, could create conditions for insufficient performance for Bitcoin by fall.
Liquidity headwinds will temporarily, but effectively limit crypto enthusiasm until restocking is complete in the second half of 2025.
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