The Bitcoin Layer How the Fed Lost Control of Liquidity (and What It Means for Bitcoin)
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Nov 5, 2025 Dive into the relationship between the Fed and Bitcoin as liquidity dynamics shift. Discover how fiscal dominance influences global money flow more than traditional monetary policy. Unpack the intriguing notion that Bitcoin functions as a liquidity asset rather than a safe haven. Explore whether the real economy's credit creation will redefine Bitcoin's future more than periodic market cycles. The discussion promises insights into how today’s economic landscape is transforming the perception of cryptocurrency.
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Fed's Unofficial Third Mandate Matters
- The Fed now balances two official mandates and an unofficial financial-stability mandate centered on funding markets.
- Repo tightness can force the Fed to prioritize stability over strict 2% inflation targeting.
Repo Outside The Corridor Triggers Fed Action
- Repo markets trading outside the Fed's corridor force the Fed to act, ending QT and prompting liability support programs.
- The Fed will announce t-bill purchases to increase reserves and calm funding markets.
Fiscal Dominance Controls Funding Conditions
- Treasury issuance size drives funding demand and can create repo tightness via fiscal dominance.
- More T-bills increase collateral needs and can push the Fed to expand reserves.