TechFlow news, November 4 — Chloe (@ChloeTalk1), author of the HTX DeepThink column and researcher at HTX Research, analyzed that the Federal Reserve's recent announcement to halt its balance sheet reduction on December 1 and cut policy rates to 3.75%–4.0% marks the end of a three-year quantitative tightening cycle. Powell stated that overnight repo rates and stress in funding markets indicate bank reserves are nearing the lower bound of "abundance," and ending balance sheet runoff would prevent further liquidity withdrawal. This policy shift stems from three synchronized tightening indicators within the financial system. The overnight reverse repurchase facility (ON RRP) balance has dropped from its 2022 peak of $2.6 trillion to nearly zero by the end of October. According to Reuters, continuing balance sheet reduction after RRP exhaustion would directly compress bank reserves and push up short-term rates. Treasury General Account (TGA) ledger data shows an ending balance of approximately $983.9 billion on October 29; high balances imply fiscal funds have not yet entered the market. Bank reserves stand at around $3.3 trillion—approaching levels seen during the 2019 funding stress. Taken together, the Fed’s decision to “stop shrinking” signals a move to release liquidity preemptively to mitigate risks.
Trading Economics data shows the 10-year TIPS real yield fell to about 1.77% on November 3, down 0.04 percentage points from the previous month; lower real yields reduce the opportunity cost of holding non-yielding assets. The dollar index hovered near 99.8 on the same day as markets await delayed economic data due to the government shutdown, and investors remain divided over whether further rate cuts will occur in December. Declining real yields and a weaker dollar provide support for risk assets.
Against a backdrop of macroeconomic uncertainty, Bitcoin’s strong rally since August has entered a consolidation phase. Open interest in Bitcoin options reached a record high of $63 billion at the end of October, with 80% concentrated on Deribit. Contracts with high strike prices ($120,000–$140,000) make up a significant portion. Around $5.1 billion in options are即将到期, with maximum pain at $114,000. The Put/Call ratio stands at approximately 1.03, yet long positions account for nearly 60%, reflecting market expectations of future upside.
The Fed’s end to balance sheet reduction implies marginal growth in money supply; declining real yields and a weaker dollar could provide medium-term support for crypto assets such as Bitcoin and Ethereum. In the short term, post-shutdown releases of CPI, employment data, and the December FOMC meeting’s stance on further rate cuts will be key. If economic data proves strong or policy turns cautious, markets may remain volatile. However, if liquidity remains loose and ETF inflows increase, Bitcoin could resume its upward trend. In the long term, tracking changes in bank reserves, TGA balances, and RRP usage will help investors understand the liquidity cycle and its impact on the crypto market.
