According to Arthur Hayes, co-founder of the BitMEX crypto exchange, crypto markets will enter “up only” mode once the United States Treasury achieves its target of filling the General Account (TGA) with $850 billion.
“With this liquidity drain complete, up only can resume,” Hayes noted on Friday as the US TGA’s balance surpassed $807 billion. The funds in the General Account are typically sequestered and do not circulate into private markets.
However, not all analysts agree with Hayes’ assertion that liquidity will return to financial markets once the US Treasury meets its goal.
“Net liquidity has a weak correlation to Bitcoin and crypto at best; I consider that a useless banana,” responded André Dragosch, the European head of research at investment firm Bitwise, stated.
Many crypto investors and traders expect liquidity levels to rise in the coming months as the US Federal Reserve engages in interest rate cuts, which should elevate asset prices until liquidity dwindles and the rate-tightening cycle resumes.
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US Federal Reserve cuts rates for the first time in 2025, while investors look forward to more cuts
The United States Federal Reserve reduced interest rates by 25 basis points (BPS) on Wednesday — marking the first cut since 2024.
Following the rate reduction, Bitcoin (BTC) fell below $115,000, demonstrating a classic sell-the-news response.
Nic Puckrin, founder of education and media outlet Coin Bureau, cautioned that a short-term pullback is likely, explaining that markets probably anticipated the cut ahead of the Federal Reserve’s announcement.
Federal Reserve chairman Jerome Powell indicated that the Federal Open Market Committee (FOMC), comprising 19 officials who deliberate on interest rate decisions, remains divided on additional rate cuts in 2025.
However, 91.9% of traders predict the FOMC will reduce interest rates by up to 50 BPS at the upcoming meeting in October, according to data obtained from the Chicago Mercantile Exchange (CME) Group at the time of writing.
The CME Group operates major financial derivatives exchanges, including futures markets.
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