Macro conditions suggest Bitcoin (BTC) might face a multi-week performance slowdown if global M2 money supply peaks in September, according to a recent report by Delphi Digital.
The BTC-M2 relationship using a 10-week offset shows M2 data already rolling over roughly 8% from projected September highs.
Bitcoin has historically followed M2 peaks with performance lags, particularly when paired with large Treasury issuance that removes liquidity from the financial system.
Treasury appears poised to begin pulling cash from markets within weeks to rebuild its General Account (TGA) at the Federal Reserve, a process potentially requiring $500 billion to $600 billion in net new debt issuance over two to four months.
Treasury’s borrowing projection for the third quarter, released July 29, forecasts over $1 trillion in net marketable debt for the quarter. The amount reflects a lower starting balance of $457 billion and weaker cash inflows than expected.
The liquidity drain operates differently than previous cycles due to depleted absorption buffers.
The Federal Reserve’s Reverse Repo Facility, which cushioned the 2023 refill with over $2 trillion in excess cash, now holds just $28.8 billion as of mid-August.
The Fed continues quantitative tightening at $60 billion monthly while foreign Treasury buyers have retreated substantially, forcing domestic markets to absorb the full issuance impact.
Stablecoin contraction signals Bitcoin vulnerability
The report noted that the 2023 TGA refill demonstrates Bitcoin’s sensitivity to Treasury-driven liquidity removal.
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Author: Gino Matos
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