Bank reserves are declining GOOD FOR Crypto :

this is good for the crypto market in the long run.

Liquidity cuts from the Fed are possible in the next two weeks.

And this will lead to a short-term drop in bank reserves as a percentage of GDP to the lowest level in more than four years.

This value could potentially drop below 11% within a few days.

Why is this important?

Because it is this indicator that dictates when the Federal Reserve will stop quantitative tightening (QT).

In January 2024, Fed Chairman Christopher Waller said that 10 to 11% of GDP would be "the approximate endpoint for withdrawing reserves from the system."

In addition, the New York Fed's open market operations report, published earlier this year, stated that, according to forecasts, QT will cease "when the share of reserves in GDP reaches about 11%" in the "scenario with higher reserves" or 9% in the "scenario with lower reserves".

It will be interesting to see if Jerome Powell addresses the issue of bank reserves and the Fed's current thoughts on the timing of QT at the FOMC meeting Today .

It is unlikely that the Fed will announce the end of QT at a meeting this month.

But we can expect an update to the balance sheet policy, since the interest rate policy is now changing.

The termination of QT will be a powerful boost to the growth of liquidity and, probably, prices for risky assets in general.

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