In recent comments, Arthur Hayes, co-founder of the cryptocurrency exchange BitMEX, suggested that Bitcoin could enter an “up only” phase once the U.S. Treasury General Account (TGA) reaches its target balance of $850 billion. As of Friday, the TGA’s balance was noted to exceed $807 billion, indicating a significant approach to the target.
Hayes pointed out that as the Treasury accumulates funds in its General Account, these dollars are effectively withheld from private markets. He believes that once the target is reached and the Treasury reduces its accumulation efforts, liquidity will begin to flow back into financial assets, potentially creating a favorable environment for Bitcoin.
However, this thesis regarding liquidity and its effect on Bitcoin prices has met some skepticism. André Dragosch, the European head of research at Bitwise, expressed doubt about the correlation between net liquidity and Bitcoin prices, labeling it as a “useless banana” in terms of its utility or predictive power.
Even amid this skepticism, many traders are closely monitoring the market for signs of increased liquidity, particularly as the U.S. Federal Reserve recently entered a rate-cutting cycle.
On Wednesday, the Fed implemented its first interest rate cut in 2024, lowering rates by 25 basis points. This announcement led to a brief decline in Bitcoin’s price, which dipped below $115,000, reflecting a typical “sell-the-news” reaction. Market analysts, like Nic Puckrin from Coin Bureau, noted that this movement was likely anticipated by traders prior to the Fed’s decision.
Looking ahead, data from the Chicago Mercantile Exchange indicates a strong expectation among traders for further interest rate cuts. Currently, 91.9% of traders anticipate an additional reduction of up to 50 basis points during the Federal Open Market Committee’s next meeting in October. However, Federal Reserve Chairman Jerome Powell has indicated that committee members are divided regarding the future direction of interest rates.
