The impact of SRF operation and dollar liquidity contraction on the crypto market

RugResistant · 2026-01-13T09:57:45+00:00

According to recent analysis by Hayes, the current bearishness in the cryptocurrency market is not just a psychological issue but is deeply related to micro liquidity changes. It is necessary to examine how the US government's borrowing structure and the Federal Reserve's permanent repurchase agreement bond facility ( SRF ) operation mode are impacting the market. Fiscal Deficit and Treasury Issuance MechanismThere is speculation that the Trump administration is unlikely to resolve the fiscal deficit through tax cuts, as the 2017 tax measures have already been extended by the Republican Party. As a result, the US Treasury continues to cover the federal deficit by

RugResistant

2026-01-13 09:57:45

According to recent analysis by Asha Hayes, the current bearish trend in the cryptocurrency market is not merely a psychological issue but is deeply connected to micro-level liquidity changes. It is necessary to examine how the U.S. government’s borrowing structure and the Federal Reserve’s standing repurchase agreement (SRF) operations are impacting the market.

Fiscal Deficit and Treasury Issuance Mechanism

There is speculation that the Trump administration’s possibility of resolving the fiscal deficit through tax cuts is low, as the 2017 tax measures have already been extended by the Republican Party. As a result, the U.S. Treasury continues to issue government bonds to cover the federal deficit, and this trend is expected to continue.

How SRF Works and Bank Funding

The standing repurchase agreement (SRF) facility is a mechanism designed to allow banks and financial institutions to obtain cash from the Federal Reserve using U.S. Treasuries as collateral. This system enables financial institutions to quickly secure the necessary liquidity.

Dollar Liquidity Contraction and Its Correlation with the Cryptocurrency Market

Currently, the U.S. government is raising funds through bond auctions. An interesting phenomenon occurs during this process: even before the Treasury spends these funds, dollar liquidity absorption effects are happening in the market. This means that liquidity in the market decreases at the bond issuance stage, negatively impacting the market.

This dollar liquidity contraction is being discussed as a primary cause of the current decline in the cryptocurrency market. When liquidity decreases, capital tends to flow out of risk assets like cryptocurrencies.

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