US Treasury Injects $500B Into Markets, May Provide Tailwind for Bitcoin (BTC)

The US Treasury has injected $500 billion into financial markets since February by drawing liquidity from its Treasury General Account (TGA), funding government operations

The US Treasury is set to inject $500 billion in liquidity into financial markets by April, Benkovskis, a macroeconomic financial analyst, said on Jan. 2.

This liquidity injection will boost the net Federal Reserve liquidity to $6.3 trillion, which may support Bitcoin’s (BTC) price in the future, even though risk assets have shown minimal growth so far.

Treasury General Account’s expected liquidity flow. Source: X.com

Benkovskis explained that the liquidity is being drawn from the Treasury General Account (TGA), which is the government’s checking account at the Federal Reserve.

The TGA balance is used to fund government operations, and a decrease in its capital means that the balance has been deployed into the broader economy, increasing the available cash in the markets.

The TGA drawdown began on Feb. 12 following the exhaustion of “extraordinary measures” after the $36 trillion debt ceiling was hit on Jan 2.

The TGA balance has decreased from $842 to roughly $342 billion, releasing liquidity into the system, and the targeted liquidity is expected to rise up to $600 billion by the end of April.

The analyst stated that the current tax season will temporarily drain liquidity, but the drawdown is expected to resume in May. If the debt ceiling talks extend to August, net liquidity could hit a multi-year high of $6.6 trillion, which could create a bullish tailwind for Bitcoin.

Bitcoin’s correlation with global liquidity. Source: Lynalden.com

According to a study by financial analyst Lyn Alden, Bitcoin has historically moved 83% of the time in tandem with global liquidity over a 12-month period.

The research, titled “Bitcoin a Global Liquidity Barometer,” compared Bitcoin to other major asset classes such as SPX, gold and VT, and BTC topped the correlation index with respect to global liquidity.

Previous TGA drawdowns in 2022 and 2023 have fueled speculative assets like Bitcoin. Hence, a $600 billion boost, plus billions more added over Q2-Q3, could lift BTC’s value if market conditions remain stable.