U.S. Government Reopens—Crypto Markets Eye Liquidity Tsunami Amid Fed Rate Cut Jitters

Markets brace for impact as federal doors swing open.

Liquidity floodgates could burst—just as the Fed plays hardball with rates.

The liquidity paradox

More dollars sloshing around usually spells rocket fuel for crypto. But this time? The Fed’s rate-cut hesitation throws a wrench in the works. Traders are left guessing whether cheap money will drown markets or if Jerome Powell’s crew will keep the taps half-shut.

Volatility alert

Bitcoin’s price action could turn into a drunken rollercoaster—liquidity surges love pumping assets, but uncertainty loves crushing them. Altcoins? Either collateral damage or unlikely beneficiaries. As usual, Wall Street will pretend it saw this coming all along.

The closer

When governments spend and central banks waffle, crypto becomes the casino for everyone who missed out on lobbying Congress. Place your bets—the house always wins (unless it’s decentralized).

The U.S. government has officially reopened after a 43-day shutdown, and the financial world is now preparing for major shifts. Macro analyst Raoul Pal believes the reopening will unleash a powerful liquidity wave that could reshape markets, interest rates, global spending, and even the future of crypto. Pal outlines how government action, central-bank policies, and international stimulus may converge in the months ahead.

Government Spending Returns to the System

According to Pal, the first major change will come from the Treasury General Account (TGA). With the government back in operation, TGA spending will resume and steadily inject liquidity into the markets. He expects this inflow to continue for several months, providing additional support to the economy.

At the same time, the Federal Reserve is preparing to end Quantitative Tightening in December. Once QT stops, the Fed’s balance sheet will stop contracting and begin expanding again, naturally adding more liquidity to the system. As liquidity rises, Pal anticipates a weakening of the U.S. dollar a typical reaction when money supply increases.

Steps to Prevent a Year-End Funding Squeeze

Pal warns that the next challenge will be avoiding a year-end funding squeeze, which often puts pressure on banks. To mitigate this risk, he expects regulators to deploy temporary liquidity tools such as Term Funding programs and Standing Repo Facility (SRF) operations to maintain smooth cash flow.

He also predicts that these short-term measures will pave the way for larger structural changes. In early Q1, Pal expects adjustments to the Supplementary Leverage Ratio (SLR), which WOULD allow banks to hold more bonds and expand their balance sheets. He describes this as a “liquidity bazooka” that could also drive interest rates lower.

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More Global Stimulus and Crypto Clarity Ahead

Globally, Pal highlights that China continues to expand its balance sheet, while Europe is preparing additional fiscal stimulus. In the U.S., new stimulus payments and increased spending under the “Big Beautiful Bill” are also likely, especially with mid-term elections approaching.

On the crypto front, Pal believes the U.S. is nearing the final stages of the CLARITY Act — a key bill that would establish a clear regulatory framework for digital assets.

Fed Rate-Cut Debate Intensifies

Despite rising liquidity expectations, Federal Reserve officials remain divided on the December interest-rate decision. Some policymakers, including Governor Stephen Miran, support a 50-basis-point cut, arguing that halting rate reductions could hinder economic progress. Others, such as long-time rate-cut advocate Mary Daly, are undecided for the first time due to mixed economic data. Minneapolis Fed President Neel Kashkari is also uncertain.

Amid this uncertainty, the crypto market has softened, with Bitcoin dropping below $100,000 and several altcoins pulling back. All eyes are now on the December 10 FOMC meeting, where the final rate-cut decision will set the tone for markets heading into the new year.

Stay ahead with breaking news, expert analysis, and real-time updates on the latest trends in Bitcoin, altcoins, DeFi, NFTs, and more.

FAQs

The reopening restores government spending through the TGA, injecting liquidity that can support stocks, bonds, and crypto in the coming months.

Stopping QT halts balance-sheet contraction, allowing the Fed to expand liquidity again, which typically eases financial conditions and weakens the dollar.

New stimulus from China, Europe, and the U.S. could boost liquidity worldwide, supporting risk assets and improving market sentiment.