Bitcoin and Stocks Slide Traced to U.S. Treasury’s $400B Liquidity Pull, Not Powell’s Speech

Bitcoin’s Slide Tied to U.S. Liquidity Drain, Not Just Jackson Hole Jitters

Bitcoin’s recent pullback, along with broader weakness in crypto and equity markets, is being increasingly attributed to an impending liquidity crunch from the U.S. Treasury—not Fed Chair Jerome Powell’s upcoming Jackson Hole speech.

Since reaching record highs above $124,000 last Thursday, Bitcoin (BTC) has dropped over 8% to around $113,500, dragging major tokens like ETH, XRP, and SOL down with it. The CoinDesk 80 Index has shed 13% over the same stretch.

Stocks have fared no better. The Nasdaq Composite fell 1.4% on Tuesday to 23,384, down from last week’s record high.

While inflation concerns and pre-Fed caution have dominated headlines, some analysts point to a more structural headwind: the Treasury’s effort to rebuild its General Account (TGA), a key cash reserve at the Federal Reserve. That process is expected to drain as much as $400 billion in liquidity from the financial system in the coming weeks.

“Jackson Hole is a convenient narrative,” said David Duong, head of institutional research at Coinbase. “But the real issue is the Treasury’s upcoming TGA refill, which is pressuring risk assets like bitcoin and equities.”

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What Is the TGA and Why It Matters

The Treasury General Account is the federal government’s main operating account, used to handle revenue collection and public spending. When the Treasury draws down the account—as it often does during debt ceiling standoffs—it adds liquidity to the system, benefiting risk assets.

But when the Treasury replenishes the TGA by issuing excess debt, it effectively withdraws liquidity from markets—tightening financial conditions.

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Liquidity Squeeze Is Already Underway

Since late July, the TGA has climbed from roughly $320 billion to over $500 billion, according to MacroMicro. Analysts expect the Treasury could raise another $500–600 billion through debt issuance over the next few months to fully rebuild the balance.

This comes at a time when market conditions are more fragile than in previous years. Delphi Digital warns that the system’s capacity to absorb a new wave of Treasuries is constrained by tighter bank balance sheets, fewer liquidity buffers, and waning foreign demand.

“In contrast to 2023, the structural absorption capacity has deteriorated,” said Marcus Wu, analyst at Delphi Digital. “If the Fed holds rates steady or delays easing, the resulting mismatch between supply and demand could push up funding costs and spill over into crypto and other risk assets.”

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No Safety Net This Time

The last major TGA rebuild in late 2024 was offset by strong liquidity backstops—like $2 trillion in the Fed’s reverse repo facility, ample bank reserves, and robust international appetite for U.S. debt.

But many of those cushions have weakened. The RRP facility is smaller, excess bank reserves have thinned, and foreign buying has declined—creating a more vulnerable liquidity environment heading into Q4.

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Outlook: A Tough Road Ahead for Bitcoin Bulls

The upcoming liquidity drain presents a significant obstacle for BTC bulls hoping to sustain momentum into year-end. Despite recent inflows and structural strength, markets may remain under pressure until liquidity conditions stabilize.

Until then, the rally narrative faces a tough challenge: fighting the Fed—and the Treasury’s tightening grip.

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