Market Turmoil: Treasury Actions Outshine Powell’s Speech in Shaping Bitcoin’s Downward Trend
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2 min read
Bitcoin’s latest downturn is not solely attributed to Jerome Powell’s impending Jackson Hole speech, but rather the insidious and potentially devastating impact of the U.S. Treasury draining a whopping $400 billion in liquidity. The Treasury General Account (TGA) refill is expected to have a far more significant influence on the market than any words of wisdom from the Federal Reserve Chairman.
The TGA operates as a sort of savings account for the government, replenishing its reserves by selling bonds and subsequently removing funds from circulation. In light of this development, Bitcoin’s recent 8% drop to $113,500 is less surprising. This sudden shift in liquidity has led to a stark contrast in market conditions compared to previous situations where banks held deeper reserves, the Fed had excess cash in its reverse repo facility, and foreign buyers were eager to absorb U.S. debt.
Fast forward to 2025, and it becomes apparent that these buffers have vanished. Banks are now stretched, demand for Treasuries has waned, and the extra liquidity that once stabilized markets has run dry. Delphi Digital’s Marcus Wu astutely points out that this TGA rebuild is significantly more jarring than past instances.
For Bitcoin enthusiasts holding onto hopes of another explosive rally, it becomes apparent that their focus should not be centered on Powell’s remarks but rather on the Treasury’s massive cash drain. Until new liquidity flows back into markets, Bitcoin may struggle to reclaim its recent highs.
It remains to be seen how the market will react to the upcoming FOMC meeting and Jackson Hole speech, but for now, it is imperative that traders and investors acknowledge the Treasury’s actions as the primary catalyst driving this downturn.
Source: coinpedia.org
