Arthur Hayes, co-founder of the BitMEX crypto exchange, believes that crypto markets will shift to an “up only” mode once the United States Treasury achieves its target of $850 billion in the General Account (TGA).
“With this liquidity drain finished, upward momentum can restart,” Hayes posted on Friday, noting that the US TGA’s balance had crossed $807 billion. Typically, when the Treasury is bolstering its General Account, those funds are reserved and do not circulate in private markets.
Yet, some analysts are skeptical about Hayes’ assertion that liquidity will flow back into financial markets once the US Treasury reaches this goal.
“Net liquidity has at best a weak correlation with Bitcoin and crypto. I consider it a futile indicator,” remarked André Dragosch, the European head of research at investment firm Bitwise, responded.
Many crypto investors expect that liquidity will increase in the coming months as the US Federal Reserve enters a cycle of interest rate cuts, which is likely to lift asset prices until liquidity tightens and interest rate hikes resume.
Related: Those chasing quick profits in crypto may face significant losses: Arthur Hayes
US Federal Reserve cuts rates for the first time in 2025 as investors anticipate further reductions
The Federal Reserve of the United States reduced interest rates by 25 basis points (BPS) — or a quarter of a percent — on Wednesday, marking the first cut since 2024.
Following the rate cut, Bitcoin (BTC) dropped below $115,000 in a typical sell-the-news reaction.
Nic Puckrin, founder of education and media platform Coin Bureau, cautioned of a short-term decline and suggested that the markets had likely anticipated the cut before the Federal Reserve’s action.
Federal Reserve chairman Jerome Powell mentioned that the Federal Open Market Committee (FOMC), comprised of 19 officials who decide on interest rates, is divided on the need for more rate cuts in 2025.
However, 91.9% of traders expect the FOMC to lower interest rates by up to 50 BPS at the upcoming meeting in October, based on data obtained from the Chicago Mercantile Exchange (CME) Group at the time of this writing.
The CME Group operates major financial derivatives exchanges, including futures markets.
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