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Key Takeaways
Why this most recent downturn in the market has been pushed by cash in the system running dry.
How US economic policies may be affecting crypto and wider financial markets.
Chart of the week: Inflationâs relationship with Bitcoin.
In all my years in this space, I donât think Iâve ever seen sentiment flip from âweâre so onâ to âweâre so doneâ. Itâs been a wild ride.
This week I wanted to spend some time looking at the road ahead for crypto. My view is that this recent move lower has largely been driven by a tightening of cash in the system, particularly in the US since August. Iâll break down what that means and why it matters.
We donât have a crystal ball, but in this article Iâll share my framework of how Iâm thinking about Bitcoin and crypto right now, and weâll see over the coming weeks how that speculation pans out.
Letâs dig in.
A Cash Crunch
Over the last few months, the US economy has been quietly losing liquidity. Not because of panic, leverage, or anything else, but because cash in the system has simply been drying up.
The chart below shows in black the Treasury General Account (TGA) has been growing since July â from a balance of $298 billion USD, to just shy of $1 trillion today. That rise has significance.
These are dollars being taken out of the system, dollars that canât be deployed across global markets.
Bitcoin, an asset sensitive to global liquidity, has seen its downturn at the same time this facility has been drying up cash in the system.
But the TGA isnât acting alone.
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When inflation stayed sticky through the summer, the Federal Reserve held rates higher for longer, and that decision has been slowly but steadily pulling money out of the system. This is whatâs known as quantitative tightening (QT) and has been the policy backdrop since 2022. Whatâs important to know about this, is that this restrictive policy will likely end at the start of December.
And when we look at what inflation is doing now is where things get interesting.
Chart of the week: Inflationâs relationship with Bitcoin
As I mentioned above, while cash in the system has been drying up, inflation has been cooling just as quickly. I wouldnât be surprised if thatâs a narrative you're not hearing right now.
The chart below tracks RINF, an ETF that reflects long-term inflation expectations in the US economy. As you can see, RINF has been trending lower throughout the second half of the year, signalling that markets now expect inflation to keep easing.
That matters because falling inflation gives the Fed room to step back from its âhigher for longerâ stance. And as inflation expectations drop, the pressure on liquidity begins to ease, laying the groundwork for a more supportive environment for assets like Bitcoin heading into 2026.
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Whatâs also interesting in this chart is the relationship between Bitcoin and RINF. Historically, Bitcoin has tended to perform best when RINF is moving higher. Meaning when the market expects inflation to rise, Bitcoin also rises.
This may seem counterintuitive, but rising inflation expectations often reflect a backdrop of economic growth and loose monetary policy, making this an interesting chart to follow as we move into 2026.
See you all again next week.
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