Seeing that comparison chart of treasury repurchases and altcoin gains, my first reaction was: history doesn't simply repeat itself, but it always carries similar rhymes. The wave of 480 billion repurchases in 2021 gave rise to a frenzy of altcoins, which many old players remember vividly — a return of 148 times in 117 days is simply a textbook case driven by liquidity. And now, the Federal Reserve has just thrown out a 500 billion repurchase "bomb," and the market has already increased by 271 times within 115 days. This is not just a coincidence, but an inevitable macroeconomic logic.
1. Treasury repurchase: The Federal Reserve's "invisible money printing" machine
Let me pour some cold water: many people think that 'treasury bond repurchase' means the Federal Reserve is directly printing money, but that's not the case. This repurchase is more like a liquidity swap - the Treasury issues new bonds and uses the money received to buy back old bonds from the market. On the surface, it looks like 'exchanging new for old', but the key is that it activates the leverage in the financial system:
Hedge fund arbitrage: institutions borrow cash at low interest through repurchase agreements (Repo), buy treasuries, and simultaneously short futures to earn the spread. This 'basis trading' requires high leverage; if banks relax margin requirements, it's like giving the market a 'gas pedal.'
The 'tap' effect of TGA accounts: the U.S. Treasury's General Account (TGA) is like a reservoir. When the government is shut down, funds are frozen, leading to a shortage of dollars in the market. Once spending resumes, the TGA balance decreases, and trillions of liquidity will surge out.
The current 500 billion repurchase, combined with the potential release of existing funds from TGA, means that the actual scale of funds flowing into the market may far exceed the figures themselves. Liquidity is not rain, but a flood—first pouring into treasuries, then overflowing into risk assets.
2. Why is this time crazier? The structure has changed, players have upgraded
Compared to 2021, the market is no longer the same battlefield:
Institutional firepower is much larger: in the last cycle, mainly retail investors and hedge funds played with leverage, but now institutions like BlackRock are seeing daily inflows of hundreds of millions of dollars through Bitcoin ETFs. The allocation demand from these 'whales' will indirectly push up the valuations of altcoins.
Political burdens have decreased: the Trump administration clearly ended its crackdown on cryptocurrencies and even discussed including Bitcoin in strategic reserves. The reduction of regulatory uncertainty has encouraged more traditional funds to enter the market.
The 'supply-side upgrade' of altcoins: in 2021, meme coins dominated the narrative; now, Real World Assets (RWA) and DePIN have actual revenue models. For example, active addresses on the Solana blockchain have doubled year-on-year, and ecological revenue supports token value rather than pure speculation.
But don’t get carried away—liquidity can push up asset prices but can also be withdrawn instantly. After the 2021 cycle, the Federal Reserve's interest rate hikes caused the market capitalization of altcoins to shrink by 80%. The key this time is to observe when the 'tap' is turned off.
3. My observation checklist: opportunities and risks coexist
I am currently focusing on three indicators, which determine how far this wave of market can go:
SOFR-FDTR spread: if short-term funding costs (such as SOFR) remain higher than the policy rate, it indicates tight interbank liquidity, and the Federal Reserve may be forced to restart overnight repurchase agreements. Currently, the spread has turned positive, signaling pressure.
TGA balance changes: once the U.S. government ends the shutdown (market predicts mid-November), the release of trillions in TGA funds will be a decisive catalyst.
The rotation rhythm of altcoins: if Bitcoin dominance (market share) falls below 50%, funds may shift significantly to altcoins. But beware of high FDV (fully diluted valuation) projects—tokens that are overvalued upon launch, which can easily crash due to unlocking sell pressure.
Conclusion: optimistic, but with stop-loss
I agree with Arthur Hayes's judgment: 'The fiscal deficit is the main character, the Federal Reserve is just a supporting role.' The U.S. debt has exceeded 36 trillion dollars, and the interest alone consumes trillions each year. Apart from continuing to 'inject liquidity' in disguise, there are almost no policy options left.
Therefore, this 500 billion repurchase is not an isolated event but the prelude to long-term liquidity expansion. But remember, stay clear-headed during the revelry:
Avoid leverage exceeding 3 times to prevent liquidation when liquidity suddenly tightens;
Prioritize projects with real revenue and low circulating market capitalization (such as RWA, on-chain infrastructure);
Set a hard stop-loss line (e.g., -20%), and don’t fall in love with the market.
Historical patterns are useful, but this time the story is destined to be more complex. What do you think? Is it a replay of the madness of 2021, or will a new plot unfold? Let's discuss in the comments.
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