Odaily Planet Daily reported that Delphi Digital stated on the X platform that the balance of the Federal Reserve's reverse repurchase agreements (RRP) has fallen from a peak of over $2 trillion to almost zero, indicating that its liquidity buffer has been exhausted.
In 2023, the scale of the RRP is sufficient to cushion the Treasury General Account (TGA) replenishment by absorbing government bond issuance, thereby avoiding the consumption of bank reserves. As the RRP balance hits bottom, this buffer no longer exists. Any future government bond issuance or TGA rebuilding must directly consume bank reserves.
The Federal Reserve faces two options: allow reserves to decline and risk a resurgence of skyrocketing repo 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 re-injecting liquidity into the market, 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 net positive for the first time since early 2022. A key resistance in the cryptocurrency market may be fading.