BitMEX co-founder Arthur Hayes is optimistic about Bitcoin’s price prospects, as he believes the US Treasury’s TGA refill has not affected the US dollar liquidity and risk markets.
The US government’s Federal Reserve Treasury General Account (TGA) uses this account to manage its cash flows and payment of bills.
The TGA refill is the process of issuing treasury bills to replenish the TGA balance when it is low. This procedure diminishes risk-free assets and US dollar liquidity, which might affect financial markets.
The US Treasury has refilled its TGA balance since June 2021 after reaching a debt ceiling deal with Congress. The TGA balance was below $40 billion during the deal but has increased to $250 billion as of June 20, 2021.
The TGA Refill and Bitcoin
Bitcoin and other risk assets are typically sensitive to the US dollar liquidity and interest rates. When the US dollar liquidity is tight, and interest rates are high, risk assets tend to underperform as investors seek safety and yield in treasury bills.
However, BitMEX co-founder Arthur Hayes argues that the TGA refill has helped the US dollar liquidity and risk markets. He has created a custom US dollar liquidity index to track how the TGA refill affects the US dollar liquidity.
The index is calculated by subtracting the change in the TGA balance from the difference in the reverse repo (RRP) facility. The RRP facility is a tool that the Federal Reserve uses to drain excess reserves from the banking system by offering treasury bills in exchange for cash.
Hayes says that if the index is positive, it means that the US dollar liquidity is increasing, which is bullish for risk assets. If the index is negative, the US dollar liquidity is decreasing, which is bearish for risk assets.
According to Hayes, the index is currently at $77 billion, which is positive for risk assets. He says that he will buy crypto as long as the index remains positive. He also predicts that the US Treasury will slow down or stop issuing debt once the TGA balance exceeds $450 billion.
Hayes’ Bullish Case for Bitcoin
Hayes is bullish on Bitcoin because he believes the TGA refill has not affected the US dollar liquidity and risk markets. He also believes that Bitcoin has additional factors that support its price growth, such as:
- The recovery of the crypto market from the recent sell-off was triggered by regulatory uncertainty and environmental concerns.
- The adoption of Bitcoin as legal tender by El Salvador and other countries that may follow suit.
- The innovation and development of Bitcoin’s network and ecosystem, such as Taproot activation, Lightning Network expansion, and DeFi integration.
- The demand for Bitcoin as a store of value, hedge against inflation, and alternative asset class.
