Bitcoin’s Liquidity Lifeline Just Got Cut—What You Need To Know
Federal Reserve liquidity is reversing after a six-month upswing, coinciding with a $5 trillion debt ceiling increase allowing the Treasury to rebuild its cash balance. This will lead to a significant liquidity drain of approximately $500 billion as the Treasury issues new short-term debt to refill the Treasury General Account (TGA). A strengthening US dollar, coupled with falling bank reserves, creates a bearish environment for Bitcoin. The correlation between Bitcoin and the US Dollar Index remains negative, indicating potential struggles for Bitcoin amid tightening liquidity. Upcoming weeks are critical as aggressive Treasury issuance could tighten liquidity faster than expected, reversing conditions that previously supported Bitcoin's price surge.
