Ethereum

Bank

Impact

Reserve

Billion

<p>The US Federal Reserve liquidity has plummeted by approximately $80 Billion. The drop was primarily caused by an increase in the usage of Reverse Repo agreements, effectively draining liquidity from the market.</p> 
<p>Concurrently, the Treasury General Account (TGA) saw a modest decrease, shedding around $30 billion to stand at $809 billion. Despite this reduction, the TGA’s balance remains high.</p> 
<p>Experts anticipated the TGA to continue declining in the coming weeks, which could result in a net increase in Federal liquidity.</p> 
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  <img loading="lazy" decoding="async" width="680" height="358" src="https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-406.png" alt="" class="wp-image-834582" srcset="https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-406.png 680w, https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-406-300x158.png 300w, https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-406-150x79.png 150w" sizes="auto, (max-width: 680px) 100vw, 680px">
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   <em>Net Federal liquidity chart | Source: Tomas/X</em>
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<p>This shift in liquidity dynamics was essential for <a href="https://www.thecoinrepublic.com/2024/11/12/bitcoin-mvrv-deviation-bands-signal-uptrend-whats-next/">Bitcoin</a>, as increased liquidity generally boosts investor sentiment leading to heightened activity and possibly higher prices in the cryptocurrency space.</p> 
<p>The forthcoming weeks could be critical in determining whether this additional liquidity will translate into renewed vigor within the crypto markets.</p> 
<h2 class="wp-block-heading" id="h-bank-term-funding-program-and-pboc-liquidity-injections"><strong>Bank Term Funding Program and PBoC Liquidity Injections</strong></h2> 
<p>As of press time, the Federal Reserve’s Bank Term Funding Program (BTFP) had experienced its most considerable weekly decline since its inception, with a $30 Billion reduction.</p> 
<p>Launched in response to the banking sector distress in March 2023, the program provided bail-out loans to stabilize the financial environment.</p> 
<p>To date, banks have repaid over 80% of the initially extended $168 Billion, totaling more than $134 Billion returned to the Federal Reserve.</p> 
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  <img loading="lazy" decoding="async" width="680" height="379" src="https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-407.png" alt="" class="wp-image-834587" srcset="https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-407.png 680w, https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-407-300x167.png 300w, https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-407-150x84.png 150w" sizes="auto, (max-width: 680px) 100vw, 680px">
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   <em>Bank Term Funding Program chart | Source: Tomas/X</em>
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<p>This massive repayment signified a substantial liquidity drain from the system, potentially influencing short-term financial conditions within the broader economy, including the cryptocurrency sector.</p> 
<p>Meanwhile, the People’s Bank of China (PBoC) injected approximately 240 Billion RMB ($33 Billion) into the money markets last week, a cautious approach in their monetary policy amidst global economic fluctuations.</p> 
<p>This injection was part of a pattern of short-term liquidity boosts that market analysts anticipate will continue, albeit moderately.</p> 
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  <img loading="lazy" decoding="async" width="680" height="287" src="https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-408.png" alt="" class="wp-image-834592" srcset="https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-408.png 680w, https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-408-300x127.png 300w, https://www.thecoinrepublic.com/wp-content/uploads/2024/11/image-408-150x63.png 150w" sizes="auto, (max-width: 680px) 100vw, 680px">
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   <em>PBoC Total liquidity injections chart | Source: Tomas/X</em>
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<p>Observers are speculating whether these injections will significantly escalate towards the 10 trillion RMB mark or maintain the usual range of 7 to 9 trillion RMB, suggesting a steady but unaggressive strategy.</p> 
<p>Despite numerous headlines suggesting major Chinese economic stimulus, the PBoC’s actions remain tempered, possibly in response to the rising USD value, constraining more aggressive monetary loosening.</p> 
<h2 class="wp-block-heading" id="h-impact-of-inflation-on-crypto"><strong>Impact of Inflation on Crypto</strong></h2> 
<p>The Federal Reserve’s approach to inflation has been a roller-coaster ride since 2021, starting with the initial declaration that inflation was “transitory,” to the later acknowledgment that it was not.</p> 
<p>Subsequent steps included accepting the need for a recession to combat inflation, hoping for a “soft landing,” and projecting that inflation would settle at 2% by 2025.</p> 
<p>Most recently, the Fed has debated whether a 50 basis point rate cut is necessary to stave off a recession, while maintaining that the economy is robust and that there is no rush to reduce rates.</p> 
<p>These fluctuating policies indicate a lack of a consistent strategy from the Fed, prompting debates about its reliability.</p> 
<figure class="wp-block-embed aligncenter is-type-rich is-provider-twitter wp-block-embed-twitter">
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   <p lang="en" dir="ltr">The Fed Since 2021:<br><br>1. Jan 2021: Inflation is "transitory"<br><br>2. Dec 2021: Inflation is not transitory<br><br>3. May 2022: Recession is needed to lower inflation<br><br>4. Feb 2023: We may be able to achieve a "soft landing"<br><br>5. Sept 2023: Inflation will hit 2% in 2025<br><br>6. July 2024: Rate…</p>— The Kobeissi Letter (@KobeissiLetter) <a href="https://twitter.com/KobeissiLetter/status/1857481083744325763?ref_src=twsrc%5Etfw">November 15, 2024</a>
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<p>For the cryptocurrency market, these economic policies and shifts in central bank liquidity could have profound implications.</p> 
<p>Cryptocurrencies like BTC and <a href="https://www.thecoinrepublic.com/2024/11/12/can-ethereum-reach-6000-as-1-59b-shorts-face-liquidations/">Ethereum</a> often react sharply to such macroeconomics, as they influence investor sentiment and risk appetite.</p> 
<p>The current scenario, where the US is tightening liquidity while China injects more, could lead to increased volatility in crypto markets, making them both risky and more rewarding for investors.</p> 
<p>As central banks wield their monetary policies, the ripple effects could push the boundaries of how cryptocurrencies are perceived and utilized across the globe.</p> 
<p>The post <a href="https://www.thecoinrepublic.com/2024/11/16/central-bank-liquidity-falls-in-us-rises-in-china-implications/">Central Bank Liquidity Falls In US, Rises In China: Implications</a> appeared first on <a href="https://www.thecoinrepublic.com">The Coin Republic</a>.</p>

Central Bank Liquidity Falls In US, Rises In China: Implications

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