Arthur Hayes: Infrastructure Bill Could Lead to Temporary USD Liquidity Crunch, Market May Consolidate Until August

BlockBeats News, July 3rd, Arthur Hayes today published an article pointing out that after the passage of Trump's spending bill (called the "Beautiful Bill"), there may be a brief pause in U.S. dollar liquidity creation.

Since January 1st, the Treasury has mainly funded the government by drawing down funds from its checking account—the Treasury General Account (TGA). As of June 25th, the TGA balance was $364 billion. According to guidance from the Treasury in its latest quarterly refunding announcement, if the debt ceiling is raised today, the TGA balance will be supplemented to $850 billion through issuing bonds. This will result in a $486 billion U.S. dollar liquidity contraction. The only major U.S. dollar liquidity item that could offset the negative impact is funds flowing out of the RRP account (currently at $461 billion).

The bull market may be interrupted in the short term. From now until August when Jerome Powell speaks at the Jackson Hole Fed meeting, the market will trade sideways to slightly lower. If the TGA supplementation proves detrimental to U.S. dollar liquidity, then the downside risk is between $90,000 and $95,000. If the supplementation proves to be inconsequential, Bitcoin will hover around $100,000 and not break above the all-time high of $112,000.

"I have a feeling Powell will announce the end of quantitative tightening and/or other seemingly mundane but significant banking regulatory reforms." By early September, the debt ceiling will be raised, the TGA will be effectively replenished, and the Republicans will focus on distributing welfare so they won't suffer Mamdani's blow in their home district in November 2026. By then, the Green Cross Star will pierce through the bears fueled by the surge in currency issuance.