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Why is Bitcoin Trapped in Volatility? The Key Lies in Market Liquidity
While BTC is trading around $103,133 (+1.48%), something important is happening behind the scenes that explains why the price isn't taking off.
The Liquidity Trap
The closure of the U.S. government has created an unexpected effect: the General Treasury Account (TGA) is accumulating cash instead of spending it. The current balance is around $965 billion, with an increase of about $150 billion just in October. This money leaving the market is liquidity that stops circulating.
Three Simultaneous Pressures
1. The trap of the month: Towards the end of October, banks are beautifying their balance sheets, which triggers the Reverse Repo (RRP). It has risen $20 billion just this week, draining more liquidity.
2. Bank reserves at a minimum: Banks are now operating at the lower end of what is considered “ample” for reserves, creating friction in funding markets.
3. The SRF at all-time highs: The Fed's Standing Repo Facility reported yesterday more than $10 billion in loans —the highest level since its inception in 2021. Financial firms are borrowing at record rates.
Why Bitcoin Suffers More
It is not extreme system stress, but the pressure is there. And Bitcoin, being hypersensitive to changes in macro liquidity, is the perfect thermometer. When money is withdrawn from the system, risk assets like BTC get stuck in volatile ranges with no clear direction.
The lesson: before looking for the next rally, observe the liquidity. Bitcoin does not fail because the fundamentals are weak, but because the macro context is taking the air out of it.