Analysis: The U.S. Treasury will extract $500–600 billion in cash from the market over the next two months, and market liquidity will become more fragile.

On August 20, Delphi Digital's market research institute published an article stating that in the coming weeks, the U.S. Treasury will begin to replenish its General Account (TGA), a process that will draw $500 billion to $600 billion in cash from the market over approximately two months. On the surface, this seems ordinary, but the current cycle is evolving into one of the weakest liquidity environments in the past decade. In 2023, the $550 billion TGA replenishment was buffered by over $2 trillion in Fed reverse repo tools, healthy bank reserves, and strong overseas demand for government bonds. Today, those buffers are gone. The Fed is still consuming liquidity through Quantitative Tightening (QT), reverse repos are nearly exhausted, banks are constrained by losses and capital rules, and overseas buyers from China to Japan have also exited the market. The result is that every dollar the Treasury raises this fall will be drawn directly from active market liquidity. High beta tokens amplify the fall when liquidity tightens. If the supply of stablecoins contracts during the TGA replenishment, ETH and other high-risk assets may see greater declines compared to BTC, unless there is structural inflow from ETFs or corporate treasuries. In a weak liquidity environment, position management and capital rotation across the risk curve are more important than ever. If stablecoins expand while TGA rises, the crypto market may absorb shocks better than in previous cycles; if stablecoins contract, liquidity extraction will be transmitted more quickly and intensely.