“Sell me this Q4”
Q3 ended with crypto lagging equities, but the headline story isn’t a hidden liquidity shock. Rather, it was the temporary cooling of ETF flows that removed crypto’s key marginal bid just as Treasury liquidity tightened. With the TGA refill nearly complete, stablecoin balances high and several structural tailwinds emerging, Q4 is shaping up as a potential inflection point. The setup is constructive, but near-term positioning risks shouldn’t be ignored. Read on for more.
1. Setting the Stage
Between mid-July and mid-September, the Treasury General Account rose from roughly $280B to $850B before easing back toward $750B. The refill represented a meaningful withdrawal of liquidity from the system. Under normal conditions, a drain of that size would be expected to weigh on risk assets more broadly.
Equities, however, continued to push to new highs through September, while BTC and the broader crypto market weakened. This divergence reflects a difference in market structure rather than an undiscovered liquidity shock. Equities are supported by systematic flows, corporate buybacks, and passive allocations that provide a steady bid even as liquidity tightens. Crypto lacks these structural supports and is more dependent on marginal capital flows.
Over the course of Q3, those flows shifted. ETF inflows, which had been the dominant marginal buyer for BTC throughout the first half of the year, slowed materially from July onward. At the same time, stablecoin supply continued to expand, indicating that capital remained in the system but was not rotating into risk. The result was weaker crypto
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