$88 Billion Bank Reserve Drop Doesn't Prove Bitcoin Liquidity Squeeze

The recent $88 billion drop in bank reserves has sparked concerns about Bitcoin's liquidity. However, a closer look at the Federal Reserve data reveals that this decline is largely due to Treasury cash and reverse repos, predominantly involving foreign official accounts.

The Wednesday reserve series fell from $2.969922 trillion on September 23 to $2.881686 trillion on September 30, a drop of $88.236 billion. Meanwhile, the weekly-average series rose from $2.930193 trillion to $2.948090 trillion for the weeks ending on those dates.

The Treasury General Account's Wednesday balance rose $36.729 billion to $984.046 billion, while its weekly average fell $28.410 billion to $948.674 billion. This discrepancy highlights the importance of choosing the right time window when analyzing reserve levels and their impact on Bitcoin liquidity.