Crypto markets are poised for a significant upswing once the United States Treasury completes its target of filling the General Account (TGA) to $850 billion, according to Arthur Hayes, co-founder of the BitMEX crypto exchange. Hayes highlighted this potential shift on Friday, noting that the TGA’s balance recently surpassed $807 billion. He explained that once the liquidity drain associated with this increase in the General Account is final, the flow of capital back into private markets could restart, allowing for a bullish trend in cryptocurrencies.
However, skepticism surrounds Hayes’ assertion among certain analysts. André Dragosch, the European head of research at investment firm Bitwise, expressed doubt about the correlation between net liquidity and cryptocurrency prices. He referred to the relationship as “loose” and dismissed it as of little consequence.
Despite the mixed perspectives, many investors in the crypto sector are optimistic about increased liquidity in the near future. This expectation comes as the US Federal Reserve transitions toward a cycle of interest rate cuts, potentially driving up asset prices until liquidity becomes constrained once more, leading to another cycle of rate tightening.
In a notable move, the US Federal Reserve recently cut interest rates by 25 basis points (BPS) for the first time since 2024. Following the announcement, Bitcoin prices dipped below $115,000, illustrating a classic “sell-the-news” reaction from the market. Nic Puckrin, founder of education and media firm Coin Bureau, cautioned investors about a potential short-term pullback, suggesting that the market may have already considered this rate cut prior to the Fed’s official decision.
Adding to the conversation, Federal Reserve Chairman Jerome Powell noted that the Federal Open Market Committee (FOMC), which consists of 19 officials who guide interest rate policies, remains divided on the prospect of further rate cuts in 2025. Nonetheless, data from the Chicago Mercantile Exchange (CME) Group indicates that 91.9% of traders are anticipating a reduction of up to 50 BPS in the upcoming FOMC meeting scheduled for October.
As the market navigates these developments, optimism persists among certain factions in the crypto community, even as the interplay between federal monetary policy and cryptocurrency valuations remains complex and often unpredictable.
