The Fed's reverse repo tool has plummeted to its lowest point in 1596 days, what does the crack in the liquidity pillar mean for Bitcoin? | Analysis of the relationship between macro liquidity and the crypto market

The scale of the Fed's reverse repurchase agreement (RRP) tool has fallen to its lowest level in 1596 days, revealing that the global market liquidity base is loosening. Wall Street experts warn that when the RRP is exhausted, the issuance of government bonds will be directly taken over by private buyers, pushing up bond yields and triggering a tightening of financial conditions. This change may temporarily suppress the prices of stocks, bonds, and Bitcoin, but in the medium to long term, it could force the Fed to restart quantitative easing, becoming a catalyst for a explosive rise in Bitcoin.

[Analysis of RRP Mechanism and Liquidity Buffer Role] The reverse repurchase agreement (RRP) is a key tool for the Fed to absorb excess liquidity in the financial system, and its decrease in scale indicates that the $2 trillion of excess liquidity accumulated during the pandemic is nearly exhausted. Kevin Malone, founder of Malone Wealth, pointed out that after the disappearance of the RRP as an "excess buffer," every new issuance of government bonds will need to be directly absorbed by private buyers, which will intensify the competition for funds among banks, hedge funds, and money market funds, driving up borrowing costs and significantly tightening financial conditions.

[Expert Warning: Turbulence in the Bond Market May Trigger Fed Intervention] Bruce, co-founder of Schwarzberg, emphasized that the decline in RRP poses a short-term bearish outlook for stocks, bonds, and Bitcoin. As the most important market globally, if the U.S. bond market loses the purchasing support of RRP, yields will continue to rise, potentially forcing the Fed to intervene by providing new liquidity. Heresy Financial analyst Joseph Brown further pointed out that the Treasury is accelerating short-term borrowing even in the face of RRP exhaustion, with an estimated $1.5 trillion in new national debt expected to flood the market by the end of the year. This aggressive issuance strategy implies an urgent expectation for interest rate cuts.

[Cryptocurrency Perspective: QE after Liquidity Tightening and Opportunities for Bitcoin] Cryptocurrency analyst Quinten offers a different perspective, suggesting that a zero balance in RRP will make quantitative easing (QE) and a new round of money printing inevitable. Historical data shows that when the liquidity engine shuts down, the Fed often resorts to excessive money issuance to maintain market stability, and this environment is very favorable for scarce assets like Bitcoin. Although there may be selling pressure in the short term, in the medium to long term, Bitcoin may become the biggest beneficiary of the liquidity reset process.

[Conclusion] The rapid decline of RRP marks the end of the liquidity feast in the post-pandemic era, as global markets face a triple challenge of rising financing costs, a surge in government bond supply, and policy interventions. For cryptocurrency investors, it is important to be wary of the risks associated with rising short-term market volatility, while also paying attention to potential signals of a shift in Fed policy — if QE is forced to restart, Bitcoin may usher in a new round of epic行情. It is recommended to closely monitor changes in RRP balances and the dynamics of the Fed's balance sheet.