06/01/26

24

This week’s dominant question in financial markets concerns the integrity of the ongoing cycle and the timing of a potential return to a bullish environment. Two prominent macroeconomic analysts outline a similar causal framework: the current downturn in digital assets and risk markets is primarily driven by liquidity constraints, with sentiment being a secondary factor. Their analysis emphasizes the critical role of the US Treasury General Account (TGA), Federal Reserve balance sheet policies, and fiscal policy timelines in determining future market direction.

One analyst notes that liquidity has been tightening as cash flows have shifted into the Treasury’s account, which has filled beyond its typical cap due to increased issuance and specific timing of payments, exacerbated by the imminent government shutdown. This influx depletes available bank reserves, especially as quantitative tightening (QT) continues to shrink the Fed’s balance sheet. The broader consequence is a liquidity squeeze, which tends to pressure risk assets, including cryptocurrencies and equities. The analyst highlights a key resistance level for the US dollar index, suggesting its rally could peak around 101, which might signal an impending shift in liquidity conditions.

Meanwhile, another macro strategist focuses on the global liquidity cycle, emphasizing that the current crisis is a direct result of fiscal tightening caused by the government shutdown. Once the shutdown concludes and the Treasury resumes spending, liquidity conditions are expected to loosen markedly. This shift would likely weaken the dollar and provide a foundation for renewed risk asset performance, including Bitcoin. The strategist also points to upcoming policy changes — such as adjustments in the supplementary leverage ratio and regulatory clarity — that could further bolster the market environment.

Both experts agree that the key to the forthcoming rally hinges on resolving Washington’s fiscal deadlock, which would allow the Treasury to resume large-scale spending and ease the liquidity crunch. While no precise timing is offered, they concur that the sequence involves the government reopening, a pause or reversal in QT, a decline in the dollar’s strength, and an infusion of fiscal stimulus — setting the stage for a likely market rebound into 2024.