The questions dominating crypto desks this week are whether the cycle is intact and when the bull market will return. Two widely followed macro commentators have drawn the same causal chain from public sector money management to crypto asset beta, arguing that the current drawdown is first a liquidity story and second a sentiment story, and that its reversal depends on the structure of the US Treasury General Account (TGA), the Federal Reserve’s balance sheet policy, and the timing of Washington’s reopening of the economy.
Cryptocurrency market awaits US government shutdown resolution
X’s macro analyst @plur_daddy summed up the current situation bluntly, saying, “We’re seeing liquidity contraction trickle into risk markets. Naturally, it first appeared within the market within BTC and stocks, and now it’s finally impacting the broader index.” He explains that a textbook-quality rotation is underway. “Speculative themes such as quantum, nuclear, drones, and alternative energy are being disrupted,” while trends are consolidating into mega-cap stocks and earnings-backed momentum, particularly the AI capital investment complex.
His reading is that the underlying plumbing is depleting bank reserves as cash piles up in the TGA and quantitative tightening (QT) continues to shrink the Fed’s balance sheet. “Mechanical factors such as issuance increases, the timing of certain payments, and government shutdowns have caused the TGA to fill beyond the Treasury’s $850 billion limit, reducing financial liquidity. Bank reserves are more broadly deficient and remain below a key benchmark of $3 trillion.” His conclusion is conditional but clear. These stresses “will prompt action to calm the market’s plumbing, but that will take time.”
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Regarding risks between the dollar and assets, he pointed to key levels: “DXY has been rising and is now approaching the key level of 101, which would be a logical point for upside. I continue to believe that the Trump administration wants a weaker dollar.” In his tone, the path to a crypto bottom is clearly tied to policy milestones: “Government reopening will be a clear trigger for the bottom of the liquidity situation, followed by an unwinding of QT on December 1st and potentially further Fed action (including hints at note buybacks) on December 10th. With OBBBA in full swing, the deficit will widen significantly from January 1st.”
He characterizes Bitcoin’s trend as resilient, saying, “Despite the incredible sell-off in OG, the aftermath of 10.10, and the factors listed above, BTC is holding up well,” and explains his strategy accordingly: “I currently have a sizable cash position and plan to aggressively add equities (particularly memory trading) and BTC once a government reopening looks imminent.” A few hours later, he added, “I bought Bitcoin. We are seeing progress towards government reopening and signs that liquidity headwinds have peaked. The risk/reward here is strong and sentiment is exploding.”
When liquidity returns
Raul Pal, whose framework focuses almost entirely on global liquidity cycles, takes the same theory to its logical macro conclusion. “If global liquidity is the single most dominant macro factor, then that’s where we have to focus,” he wrote, before narrowing down next year’s market structure to a single constraint: “Remember, the only debt in town is $10 trillion in debt. Everything else is a sideshow. This is the game for the next 12 months.”
According to Pal, the effects of the government shutdown have been immediate and mechanical: “The government shutdown has forced a sharp tightening of liquidity as TGA has built up and has no use for it. This is not offset by the ability to deplete reverse repos (which are depleted). And QT is further depleting liquidity” – and cryptocurrencies, the highest beta liquid assets, are bearing the brunt.
“As soon as the government shutdown ends, the Treasury will start disbursing $250 billion to $350 billion in the next few months. QT ends and the balance sheet technically expands. The dollar will likely start falling again as liquidity starts flowing,” he argues.
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Layering on future policy and regulatory catalysts, he said, “Changes to the SLR will free up more of banks’ balance sheets and allow for credit expansion. Passage of the CLARITY Act will provide much-needed crypto regulation for mass adoption by banks, asset managers, and enterprises across the board. The Big Beautiful Act will then be activated to accelerate the economy heading into the midterm elections,” he said, framing the global context as additive, with China’s balance sheet expansion and Japan’s policy mix supporting a broader risk rally.
His tactical advice is to embrace bull market volatility without overreacting. “Always remember the ‘Don’t Fuck This Up’ rule…wait for volatility to rise. Drawdowns like this are common in bull markets, and their job is to test your beliefs. Preferably BTFD. ” The punchline comes down to one metric in his dashboard. “td:dr — When this number goes up, all numbers go up.”
Common to both perspectives is the dollar’s liquidity advantage, specifically the interaction of Treasury cash balances, Fed asset purchases or outflows, and available bank reserves once reverse repurchase programs have largely normalized. When the TGA rises without offset, it acts as a suction pump for the aggregate reserve. When stock prices fall due to Treasury spending, reserves are rebuilt, the marginal cost of leverage eases, and high-beta assets (notably cryptocurrencies) tend to outperform.
Where does that leave the question of timing implied by all the red candles on crypto Twitter? Neither source provides a date, but both link the next bull market in the same order. That means a resolution in Washington to convert the TGA from saving to spending, a tangible relief from foreign exchange reserve shortages through a suspension or rollback of QT, a reorientation of the dollar away from resistance, and a new fiscal impulse to reinvigorate growth momentum into 2026.
At the time of writing, the market capitalization of cryptocurrencies was $3.38 trillion.
Featured image created with DALL.E, chart on TradingView.com
