In early February, we wrote about the turnaround in the global liquidity cycle and its influence on the market’s strong start to the year.

Since then, the broad crypto market is up ~14%, largely driven by BTC and ETH, which have gained 25% and 15%, respectively. Bitcoin’s outperformance is logical given it’s arguably the “closest to the money” and the purest play on liquidity fluctuations.

Liquidity conditions have tightened in the last few weeks, however. The recent increase in the TGA — which has a dampening effect on liquidity conditions — was expected as tax season approached. The same thing happened this time last year, although lighter-than-expected tax receipts this year have dampened the impact. At the same time, we’ve seen bank reserves decline by more than ~$300B since their mid-March peak while the RRP has grown nearly $200B over the same period. All the while, the Fed continues to let its Treasury holdings roll off its balance sheet. All of these factors serve as drags on liquidity conditions, at least in the near term.

The plateau in global liquidity growth has started to pare gains in liquidity-sensitive assets such as crypto and even gold. For more, including our long-term outlook, check out our extended report.