According to Arthur Hayes, co-founder of the BitMEX crypto exchange, crypto markets will enter an “up only” mode once the United States Treasury reaches its target of filling the General Account (TGA) with $850 billion.
“With this liquidity drain complete, up only can resume,” Hayes wrote on Friday, as the US TGA’s balance surpassed $807 billion. When the Treasury is filling its General Account, the funds are typically held back and do not circulate into private markets.
However, some analysts are skeptical of Hayes’ claim that liquidity will return to financial markets when the US Treasury meets its goal.
“Net liquidity has a loose correlation to Bitcoin and crypto at best, which I consider a useless indicator,” stated André Dragosch, European head of research at investment firm Bitwise, in response.
Many crypto investors and traders expect increasing liquidity levels in the upcoming months as the US Federal Reserve initiates a cycle of interest rate cuts, potentially elevating asset prices until liquidity diminishes and the tightening process resumes.
Related: Bitcoiners chasing a quick Lambo are heading for a wipeout: Arthur Hayes
US Federal Reserve cuts rates for the first time in 2025, while investors expect more reductions
This Wednesday, the United States Federal Reserve cut interest rates by 25 basis points (BPS), marking the first reduction since 2024.
Following the rate cut, Bitcoin (BTC) fell below $115,000 in a typical sell-the-news reaction.
Nic Puckrin, founder of the education and media company Coin Bureau, warned of a potential short-term pullback, noting that markets likely anticipated the cut ahead of the Fed’s announcement.
Federal Reserve chairman Jerome Powell indicated that the Federal Open Market Committee (FOMC), which includes 19 officials responsible for interest rate decisions, remains divided on further rate cuts in 2025.
Nonetheless, 91.9% of traders predict the FOMC will cut interest rates by up to 50 BPS at the next meeting in October, according to data obtained at the time of this writing from the Chicago Mercantile Exchange (CME) Group.
The CME Group operates major financial derivatives exchanges, including futures markets.
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