Crypto markets have experienced a lull as the U.S. Treasury has been reducing liquidity in the system. However, as it nears the completion of its Treasury General Account (TGA) refill, which former BitMEX CEO Arthur Hayes termed a “liquidity drain,” the “up only” trend may be set to resume.
The TGA functions as the government’s checking account at the Federal Reserve. When the TGA requires a refill, the Treasury issues new debt, effectively extracting liquidity from the wider financial system.
In 2025, the Treasury aimed for a refill target of $850 billion. Achieving this objective involved absorbing hundreds of billions through the sale of Treasury Bills and bonds; funds that could have otherwise buoyed stock and crypto markets.
Once the government’s checking account is replenished, that capital remains inactive, unavailable to investors, resulting in a contraction of market liquidity.
Did the TGA refill lead to a market stall?
Yes, at least in part. The TGA refill initiated a temporary liquidity vacuum. Bitcoin plummeted to around $113,500 after peaking above $124,000 earlier in the year. The Nasdaq saw a decline of about 1.4% as well. This liquidity drain aligned with a setback in most risk assets, not due to a significant change in fundamentals, but simply a reduction in cash available for speculation.
Simultaneously, the Federal Reserve announced its first rate cut of 2025, decreasing the Fed funds rate to a range of 4.00%-4.25%. Markets anticipate at least two additional cuts before the year concludes.
This signifies a notable departure from two years of tightening, and traditionally, lower rates have provided strong support for risk assets like stocks and crypto.
The Fed highlighted a slowing labor market and deteriorating economic data as primary justifications for the rate cut, indicating that policy is shifting to bolster growth, even though inflation isn’t fully under control yet.
The trillion-dollar firehose for crypto
One of the main arguments for the “up only” perspective: capital is waiting on the sidelines. Money market funds have ballooned to a record $7.5 trillion as of mid-September 2025; this money has been generating yields in low-risk environments but could be directed into stocks, bonds, or crypto once risk appetites re-emerge.
As the liquidity tide shifts, which it appears to be doing now, that capital has the potential to spark an intense rally.
With the TGA refill largely completed, the liquidity drain is poised to reverse. Coupled with a more accommodating Federal Reserve and trillions of dollars ready to be deployed, the foundation is laid for renewed risk-on momentum.
The liquidity withdrawal phase is concluding, the rate cut cycle is underway, and a substantial cash reserve is prepared to pursue yield and growth again. Or as Hayes succinctly puts it, “up only can resume.”
