Odaily Planet Daily reports that Delphi Digital stated on platform X that the balance of the Federal Reserve's reverse repurchase agreements (RRP) has fallen from a peak of over $2 trillion to nearly zero, indicating that its liquidity buffer has been depleted.
In 2023, the scale of RRP is sufficient to buffer the Treasury General Account (TGA) replenishment by absorbing Treasury bond issuance, thus avoiding the consumption of bank reserves. As the RRP balance hits rock bottom, this buffer no longer exists. Any future Treasury bond issuance or TGA reconstruction must directly consume bank reserves.
The Federal Reserve faces two choices: allow reserves to decline and risk a resurgence of spikes in repurchase agreement rates, or directly expand the balance sheet to provide liquidity. Given the situation in 2019, the second option is more likely. This means the Federal Reserve will shift from withdrawing liquidity to injecting liquidity back into the market, marking a significant change over the past two years.
With the end of quantitative tightening (QT) and the upcoming reduction of TGA, marginal liquidity has turned positive for the first time since early 2022. A key resistance in the cryptocurrency market may be fading.