$88 Billion Bank Reserve Drop Does Not Prove Bitcoin Liquidity Squeeze
The recent $88 billion bank reserve drop has sparked concerns about a potential Bitcoin liquidity squeeze. However, experts argue that this decline does not necessarily prove a shortage of funds for buying Bitcoin.
According to Federal Reserve data released on October 1, bank reserves fell by $88.236 billion between September 23 and September 30. But when examining the weekly average, reserves actually rose by $17.897 billion during this period.
The distinction is crucial because it highlights that different measures can provide opposing market signals. For instance, while Wednesday reserve balances declined, the weekly-average series showed an increase.
A deeper analysis of the data reveals that a significant portion of the reserve decline was due to Treasury cash and reverse repos, primarily involving foreign official accounts. These transactions accounted for $30.080 billion of the total decline.