Stealth QE and Deficits to Fuel Next Crypto Bull Market
Rising US government deficits and the Federal Reserve’s stealth quantitative easing via its Standing Repo Facility are poised to spark the next crypto bull market. As annual Treasury issuance approaches $2 trillion, relative value hedge funds fund purchases through repos. When repo liquidity tightens, the Fed’s SRF creates off-balance-sheet USD liquidity, widening dollar supply. This stealth QE supports future crypto gains.
Recent market weakness reflects a drain on the Treasury General Account during the US government shutdown. Once the shutdown ends and SRF lending expands, excess USD liquidity will re-enter markets, underpinning Bitcoin and broader crypto rally. Traders should watch SRF balances, repo rates (SOFR spreads), Treasury auctions, and TGA flows as leading indicators of the next crypto bull market.
Bullish
The article argues that expanding US deficits, financed via the Fed’s off-balance-sheet repo operations, will inject excess USD liquidity into markets—historically a key bullish driver for Bitcoin. In the short term, market weakness due to the Treasury General Account drain may persist, but once the shutdown ends and the SRF ramps up, this liquidity will flow back into crypto, triggering renewed buying pressure. Over the longer term, sustained repo injections and high deficit issuance underpin a broad liquidity backdrop that favors crypto rallies. Monitoring SRF usage, repo rates, and Treasury auctions can help traders time entries, making the outlook clearly bullish for Bitcoin and the wider crypto market.