CoinVoice has learned that Delphi Digital posted on platform X, stating 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 RRP is sufficient to buffer the replenishment of the Treasury General Account (TGA) by absorbing Treasury bond issuance, thereby avoiding the consumption of bank reserves. With the RRP balance hitting bottom, that buffer no longer exists. Any future Treasury bond issuance or TGA reconstruction must directly consume bank reserves.
The Federal Reserve faces two choices: either allow reserves to decline and risk a resurgence of soaring repo rates, or directly expand the balance sheet to provide liquidity. Given the situation in 2019, the second option seems more likely. This means the Federal Reserve will shift from withdrawing liquidity to re-injecting liquidity into the market, which is a significant change from 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 away.[Original link]