Bitcoin’s Liquidity Lifeline Just Got Cut—What You | Crypto News
The liquidity engine that has supported risk belongings, including Bitcoin, since the start of 2025 is now shifting into reverse. According to macro analyst Tomas (@TomasOnMarkets), the six-month upswing in Federal Reserve liquidity has ended, and a probably destabilizing wave of debt issuance by the US Treasury is about to start. In a post revealed on X late Sunday, Tomas warned: “ Federal Reserve Liquidity set to fall… The Fed liquidity upswing that began on January 1 2025 is now over.”
Bitcoin Enters Danger Zone
The catalyst behind this reversal is the latest $5 trillion debt ceiling increase handed by Congress final week. That legislative determination provides the Treasury Department the inexperienced mild to aggressively rebuild its money steadiness at the Federal Reserve—recognized as the Treasury General Account (TGA)—which had been deliberately drained to inject liquidity into the system during the first half of the yr.
“The US Government had previously been draining the Treasury General Account (liquidity injection). But a new debt ceiling agreement was reached last week ($5 trillion raise). This means the Government will start to flood the market with new debt to ‘refill’ the TGA (liquidity drain),” Tomas wrote. He emphasised that the refill goal is at present set at $850 billion, up from latest ranges around $350 billion, implying roughly $500 billion in liquidity will probably be eliminated from the system in the approaching months.
The implications for Bitcoin are stark. Risk belongings have traditionally benefited from rising greenback liquidity—significantly in the context of elevated ETF inflows, company adoption, and a weakening US greenback. But that backdrop is now shifting. As Tomas put it, “All else being equal, this TGA rebuild process should be bullish for the US dollar.” A strengthening greenback, when coupled with falling bank reserves, is mostly a bearish setting for Bitcoin.
The stress on liquidity received’t essentially come all at once, but the mechanics are clear. Treasury will difficulty giant volumes of new short-term debt—primarily T-bills—to finance the TGA refill. This issuance will compete with different dollar-denominated belongings for funding, draining money out of banks and money markets.
Tomas notes that this dynamic could possibly be softened if money market funds rotate their money out of the Fed’s Overnight Reverse Repo Facility, which still holds about $214 billion. “It’s possible that Treasury Secretary Scott Bessent could lower the target level, meaning less of a refill,” he provides. “I’d expect we may see a lot of T-bill issuance, which could tempt some of the remaining $214bn left in the Reverse Repo to leave the facility (liquidity injection) and lessen any negative impact of the TGA refill.”
Still, even with some reallocation from RRP, Tomas expects the general impact to cut back reserve balances—bank reserves as a share of GDP are seemingly to fall below 10%, he estimates. While this is just not as dire as the 7% stage reached in 2019 (which triggered the repo disaster), it represents a sharp tightening in contrast to the first half of this yr. “There could be some funding stress around the end of September (end-of-quarter),” Tomas cautioned.
Bitcoin’s efficiency has coincided with the precise window Tomas outlines as a liquidity upswing. As documented, Bitcoin’s price has intently tracked the direction of combination G5 central bank steadiness sheets and the extent of US bank reserves. When those reserves shrink—particularly in the face of stronger Treasury issuance and a rebounding greenback—Bitcoin has traditionally struggled to maintain upside momentum.
This concern is compounded by Tomas’s warning that speculative short positioning against the greenback has reached extremes. “Back in January, I was shouting about a fall in the dollar. Now everybody and their mothers are bearish on the dollar, and positioning is massively short across the board. It’s time for, at the very least, an upward correction/consolidation for the US dollar, in my opinion.”
Such a reversal in the greenback would mark a vital macro headwind for Bitcoin. The 90-day rolling correlation between Bitcoin and the US Dollar Index (DXY) stays firmly destructive. In environments where the greenback strengthens—particularly when pushed by tightening liquidity—Bitcoin has not often outperformed.
The next a number of weeks will probably be vital. If Treasury proceeds with aggressive issuance and market individuals demand larger yields, liquidity may tighten sooner than anticipated. While Tomas does depart open the likelihood that Secretary Bessent could alter the TGA goal downward, the baseline state of affairs stays a $500 billion internet liquidity drain—immediately reversing the circumstances that allowed Bitcoin to surge.
At press time, BTC traded at $108,148.
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