Former BitMEX CEO Arthur Hayes has connected the recent decline in Bitcoin’s price to a significant reduction in US dollar liquidity, primarily due to an increase in the government’s cash reserves. In a social media statement, Hayes noted that approximately $300 billion in dollar liquidity has exited the market in recent weeks, a figure corroborated by data from ChainKatcher. According to Hayes, the main cause of this liquidity contraction is a $200 billion increase in the US Treasury General Account (TGA), which serves as the government’s primary cash reserve at the Federal Reserve. He suggested that the Treasury is likely accumulating cash in preparation for a potential government shutdown to maintain federal spending despite stalled budget negotiations. This scenario is not surprising in relation to the Bitcoin price decline, as Hayes explained that Bitcoin’s price movements are closely linked to changes in global dollar liquidity. Historically, when the TGA increases, financial conditions tighten, negatively impacting risk assets such as stocks and cryptocurrencies, whereas a decrease in the TGA results in liquidity returning to the market. Hayes’ analysis highlights that Bitcoin’s market response depends not only on internal crypto factors but also significantly on US fiscal policies and the government’s financial status. This insight can help crypto investors better understand the extent to which Bitcoin price fluctuations reflect broader global financial system dynamics.
Source: binance
