- Arthur Hayes believes that the TGA reaching its target of $850 billion and eventually spilling it into the market could spur investments in risk assets like crypto.
Former Bitmex CEO Arthur Hayes boldly claimed that cryptocurrency markets have no other direction but up, as the US government is about to fill its Treasury General Account (TGM). According to the American entrepreneur, the Treasury is targeting to build up $850 billion in its account at the Federal Reserve.
“With the liquidity drain complete, up only can resume,” said Hayes on his social media account on X. At the time of his posting, the Treasury’s deposits had already reached the $807.142 billion mark.
The TGA is the checking account of the US government at the Fed. The platform maintains its cash balance, including funds derived from tax revenues, government security issuances, seizures, and other fees. The TGA is also the government’s operating account for paying its expenditures.
Arguments of Hayes
Hayes grounded his analysis on the argument that the move translates to more liquidity for the US government. For him, the trend suggests it’s taking in more money in its account than it’s spending.
However, the accumulation phase could come at the expense of draining market liquidity. But then again, the ensuing scenario, once the government starts injecting liquidity back into the financial system when it decides to spend its funds after reaching its target, would mean more cash flows across markets, which could potentially drive demand and prices for risk assets like crypto.
Hayes’ perspective is mirrored by other analysts and traders who closely monitor the TGA balance to determine the market’s liquidity. It comes with the idea that more money flowing into the market could lead to lower borrowing rates and higher investor appetite for potentially higher-yielding assets like crypto.
Dissenting Opinions
Bitwise European Head of Research André Dragosch dispelled Hayes’ forecast. He replied that net liquidity is loosely correlated with Bitcoin (BTC) and crypto.
Dragosch based his response on the fact that the TGA is not the sole determining factor of net liquidity. Besides the Treasury’s account, its measurement covers the Fed’s balance sheet (from quantitative easing or tightening policies) and the central bank’s overnight reverse repurchase agreement (ON RRP) facility.
Furthermore, others pointed out that Hayes limited his projection to a specific element and failed to consider other variables, such as macro trends, regulatory developments, and broader investor sentiment.
