In a recent analysis, Arthur Hayes, the co-founder of BitMEX, projected that the cryptocurrency markets are poised for a significant rally once the United States Treasury successfully fulfills its target of $850 billion in its General Account (TGA). As of Friday, the balance of the TGA has exceeded $807 billion, prompting Hayes to express optimism about the return of liquidity to financial markets.
Hayes emphasized that when the TGA funds are being allocated to the General Account, they typically remain inactive and do not circulate within the private markets. He indicated that once the Treasury achieves its goal and completes this liquidity drain, the crypto market could revert to an “up only” trajectory.
Despite Hayes’ bullish outlook, not all market analysts share his enthusiasm. André Dragosch, who leads research at investment firm Bitwise in Europe, voiced skepticism regarding the correlation between net liquidity and crypto asset performance. He described any prevailing relationship as “loose” and dismissed the notion that it would significantly impact Bitcoin and other cryptocurrencies.
Meanwhile, many traders are keeping a close eye on potential increases in liquidity in the near future, driven by the Federal Reserve’s ongoing interest rate cuts. Recent data indicates that the U.S. central bank cut rates for the first time since 2024, reducing them by 25 basis points. This move sparked immediate reactions in the crypto market, with Bitcoin (BTC) declining to below $115,000 in what market participants referred to as a “sell-the-news” event.
Jerome Powell, the Chairman of the Federal Reserve, acknowledged that the Federal Open Market Committee (FOMC) is divided on the approach to further rate adjustments in 2025. Yet, current market sentiment suggests that caution is warranted. According to recent figures from the CME Group, a staggering 91.9% of traders now anticipate a rate reduction of 50 basis points at the upcoming FOMC meeting in October.
This prevailing anticipation for further rate cuts has led many investors to speculate about rising asset prices across markets, including cryptocurrencies. The hope is that a sustained low-interest environment will inject much-needed liquidity into the financial system before the eventual shift to a tightening monetary policy occurs again.
As traders and investors navigate the complexities of the current financial landscape, opinions remain varied about the future trajectory of crypto assets. While some analysts predict a potential surge driven by increased liquidity, others caution against assuming a straightforward relationship between Treasury actions and crypto valuations.
As the situation develops, market participants will continue to monitor key economic indicators, including interest rate decisions from the Fed and the Treasury’s balance movements. The outcome of these events could play a crucial role in determining whether Hayes’ predictions hold merit in the shifting landscape of cryptocurrency markets.
