Delphi Digital reports in its report that the US Treasury will begin restocking its general account (TGA) in the coming weeks, withdrawing $5,000-60 billion in cash from the market in about two months in the process.
The research firm explained that this step may seem like a daily transaction in the market, but it coincides with one of the most vulnerable liquidity environments of the past decade.
It was noted that the $550 billion NPL rollover in 2023 was absorbed by the Fed’s $2 trillion reverse repo facility, strong bank reserves and high foreign demand for Treasury debt. However, according to Delphi Digital, these buffers are currently not present.
The Fed’s continued quantitative tightening (QT), near-attenuation of inverse repository, banks constrained by capital rules and losses, and many foreign investors from China to Japan are all increasing market pressure. Therefore, every time the Ministry of Finance borrows this fall, it will be directly withdrawn from aggressive market liquidity.
The report also highlights the risks of the cryptocurrency market. It should be noted that during periods of liquidity shortages, high beta assets (such as ETH and similar altcoins) tend to experience sharper losses compared to BTC. Also, be aware that ETH and dangerous assets could put additional pressure on them during the TGA rollover period, especially if the supply of stubcoin is shrinking. However, we also note that structural inflows from ETFs or the Ministry of Corporate Treasury may offset these risks.
Delphi Digital argued that, as Stablecoin Supply expands, NPL growth could be better absorbed compared to previous cycles, but in the case of supply contracts, liquidity withdrawals would be more rapidly and strongly reflected in the market.
*This is not investment advice.
