TGA Liquidity Drain Slams Bitcoin and Stocks
Bitcoin and major cryptocurrencies fell sharply this week as analysts attribute the sell-off to an impending $400 billion liquidity drain from the U.S. Treasury General Account (TGA), not Jackson Hole or inflation fears. Since hitting record highs above $124 000 last Thursday, BTC dropped over 8% to $113 500, while the CoinDesk 80 Index slid 13%. The Nasdaq also eased 1.4%. Coinbase’s David Duong warns market players are de-risking ahead of the TGA refill, which sees the account balance rising from $320 billion to over $500 billion and may require $500–600 billion in new debt issuance. Delphi Digital’s Marcus Wu notes that unlike previous rebuilds buoyed by Fed RRP injections, healthy bank reserves and strong foreign demand, today’s tighter liquidity buffers could drive up funding rates and pressure risk assets, including crypto.
Bearish
The article highlights a substantial liquidity drain from the TGA as the primary catalyst for downward pressure on Bitcoin and equities. Historically, large-scale TGA rebuilds in early 2023 and late 2024 were offset by ample Fed RRP facility balances, strong bank reserves and foreign demand, cushioning risk assets. Today, these buffers have eroded, reducing market capacity to absorb new Treasury issuance. The anticipated $500–600 billion debt sales will withdraw cash from the financial system, elevate funding rates and constrain traders’ leverage. In the short term, this liquidity squeeze is bearish for crypto trading, likely prolonging volatility. Over the longer term, liquidity normalization post-refill and potential Fed policy shifts could restore market balance, offering renewed bullish momentum.