BlockBeats news, on August 20, Delphi Digital Market Research Institute stated that in the coming weeks, the U.S. Treasury will begin to replenish its General Account (TGA), a process that will draw $500-600 billion in cash from the market over about two months. At first glance, this seems quite ordinary, but the current cycle is developing into one of the weakest liquidity environments in the past decade.
In 2023, the $550 billion TGA supplement was buffered by over $2 trillion in Federal Reserve reverse repurchase tools, healthy bank reserves, and strong overseas demand for government bonds. Today, these buffers are no longer present. The Federal Reserve is still consuming liquidity through quantitative tightening (QT), reverse repos are nearly exhausted, banks are constrained by losses and capital rules, and overseas buyers from China to Japan have also exited. The result is: every dollar raised by the Treasury this fall will be drawn directly from active market liquidity.
High beta tokens will amplify declines during tightening liquidity. If the stablecoin supply contracts during the TGA replenishment, ETH and other high-risk assets may experience larger declines compared to BTC, unless there are structural inflows from ETFs or corporate treasuries. In a weak liquidity environment, position management and capital rotation across the risk curve are more important than ever.
If stablecoins expand while TGA rises, the crypto market may absorb shocks better than in previous cycles; if stablecoins contract, liquidity withdrawal will transmit faster and more intensely.
