- According to Delphi Digital, previously, the Fed had a "reserve fund" called Reverse Repo (RRP). This fund once had over 2 trillion USD, helping the market absorb bonds without causing a liquidity shortage in the banking system.
But now that reserve has run out completely.
THIS LEADS TO A SIMPLE ISSUE:
- When the U.S. government issues more bonds or needs to replenish funds, that money will be withdrawn directly from the banking system.
- If bank reserves drop too low, the market may face a liquidity crisis again — similar to 2019.
👉 Therefore, the Fed will likely have to inject more money into the system to avoid risks.
Combined with:
- QT (tightening monetary policy) is coming to an end.
- The Treasury is about to withdraw some money from the TGA, bringing money back into circulation.
➡️ Liquidity in the market has returned to “positive” for the first time in nearly 3 years.
💡 WHY DOES CRYPTO MATTER?
- Because when liquidity increases, risk assets like crypto often benefit first.
- In summary, the Fed has exhausted the “money cushion,” so it is highly likely that liquidity will need to be pumped back in → this is a positive signal for the crypto market in the near future.
