U.S. Treasury’s Liquidity Injection Options: A Potential Boost for Crypto Market
The crypto market is poised for a significant impact as U.S. Treasury Secretary Janet Yellen prepares to announce liquidity injection options next week. These options, involving the Treasury general account and assets, have the potential to inject trillions of dollars into the economy, potentially boosting risk assets like Bitcoin.
Treasury General Account and Reverse Repurchase Agreements
The Treasury general account is a government liability that the Federal Reserve must match with assets. By reducing the balance in this account to zero, the Treasury can essentially inject $1 trillion into the economy.
Another option is to shift more borrowing to Treasury bills (T-bills). This would remove money from reverse repurchase agreements (repos), where investors lend money to the government overnight. A $400 billion reduction in repos would further increase liquidity in the market.
The Power of the Treasury Secretary
“The Fed is irrelevant,” said Arthur Hayes, a legendary crypto trader and founder of the Maelstrom investment fund. “You best respect” Yellen, he added.
Hayes believes that Yellen has the power to ignite a rally in the stock and crypto markets by implementing these liquidity injection options, especially the combination of running down the general account and repos, which would inject $1.4 trillion into the economy.
Market Expectations and Bitcoin Price
The crypto market has been drifting bearish recently, but the announcement of these liquidity injection options could change the narrative. If Yellen opts for a significant liquidity injection, it could provide a major boost to risk assets like Bitcoin.
However, Rachel Lin, the chief executive of SynFutures, cautions that the impact may not be immediate. “If we go by the previous cycles, the weeks after the halving will see a sideways or declining trend until bitcoin breaches the prior high, which currently stands at $73,600,” she said.
Conclusion
The U.S. Treasury’s liquidity injection options next week have the potential to significantly impact the crypto market. While the full extent of the impact remains uncertain, it is clear that Treasury Secretary Yellen holds the key to unlocking a potential surge in risk assets. Market participants will be closely watching the announcement, eager to see if Yellen drops the crypto bombshell that could propel the market to new heights.
also read:What is the impact of spot Bitcoin exchange-traded funds on BTC prices and ownership distribution?
Divya