The cryptocurrency market could be entering its next bullish phase, with liquidity dynamics in the United States playing a central role. Arthur Hayes, co-founder of BitMEX, has predicted that crypto markets will move into “up only” mode once the US Treasury General Account (TGA) reaches its $850 billion target.
The Treasury General Account and Liquidity Flows
The TGA functions as the Treasury Department’s primary bank account, where federal revenues are stored before being deployed. When the Treasury is filling this account, funds are effectively pulled out of private markets, reducing liquidity available for risk assets like stocks and cryptocurrencies.
Hayes noted that with the TGA balance recently crossing $807 billion, the liquidity drain may be nearing its end. Once the account reaches its $850 billion goal, the expectation is that excess liquidity will again flow into private markets, potentially fueling demand for Bitcoin and other digital assets.
While Hayes’ theory has gained traction among crypto traders, not everyone agrees. André Dragosch, head of research at Bitwise, dismissed the argument, calling the correlation between net liquidity and Bitcoin “a useless banana.” He argued that crypto price movements remain influenced by multiple overlapping factors beyond Treasury cash balances.
Federal Reserve Policy Adds Fuel to the Outlook
Liquidity conditions are also tied to monetary policy. Last week, the US Federal Reserve cut interest rates by 25 basis points, its first rate reduction since 2024. While Bitcoin briefly dipped below $115,000 in a “sell-the-news” move, investors anticipate that rate cuts will eventually boost liquidity and risk appetite.
Market expectations point to further cuts of up to 50 basis points at the next FOMC meeting in October, with over 91% of traders pricing in easing, according to CME Group data. This shift aligns with the broader belief that lower rates make risk assets, including crypto, more attractive.
Crypto Market Implications
If Hayes’ outlook proves correct, the combination of Treasury liquidity stabilization and monetary easing could trigger a strong upside for Bitcoin and altcoins. However, short-term volatility remains likely as traders weigh the pace of Federal Reserve cuts, Treasury funding operations, and global macroeconomic risks.
The crypto market is positioned at a critical liquidity juncture. Once the TGA reaches $850 billion and the Federal Reserve continues easing policy, risk assets may enter a renewed bullish cycle. Still, as history shows, investor sentiment can shift rapidly — making risk management as important as positioning for potential gains.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.