Bitcoin could be set for a big leap forward, said author Adam Livingston, after Kobeissi’s letter noted that the Federal Reserve’s bank liquidity had fallen to around $2.93 trillion.
The Kobeissi Letter is an independent macro market newsletter and widely followed X account managed by analyst Adam Kobeissi.
In its October 25 article, the newsletter focused on the number itself, not a price prediction for crypto. He pointed out that the cash that banks keep on deposit at the Fed — often called reserve balances — has slipped toward the bottom of recent ranges.
In simple terms, this balance constitutes the banking system’s current account with the central bank. When it declines, dollar liquidity appears tighter and short-term funding may become more sensitive. The point of Kobeissi’s letter was that this reading is important for how the Federal Reserve views its balance sheet and quantitative tightening.
Livingston is a Bitcoin-focused author and market commentator who writes about how liquidity cycles impact crypto. He has published two recent books – “The Bitcoin Age: Your Guide to the Future of Value, Wealth, and Power” and “The Great Harvest: AI, Labor, and the Bitcoin Lifeline” – establishing a framework that connects monetary cycles, scarcity and digital assets.
He took the same spare reading and built a thesis around it. He says liquidity levels are approaching what he calls a danger threshold where scarcity begins to take hold and policymakers pay more attention to how the market functions.
Livingston’s ties tightening in three forces, he says, strike at the same time.
According to Livingston, three forces are grabbing the money at the same time.
First, he says, the U.S. Treasury replenished its cash balance with the Fed; When the government sells more bonds to fill this account, private liquidity is absorbed and some appears as fewer bank reserves.
Second, he says, the Fed is reducing its portfolio through quantitative tightening – letting bonds mature without replacement – which also removes liquidity from the system.
Third, he says, other Fed liabilities, like currency in circulation, increase over time, taking up space on the balance sheet and leaving less room for bank liquidity unless policy adjusts.
This sequence constitutes Livingston’s frame; This is how Fed-Treasury plumbing works in practice, but the market implications he draws from it are his view.
From there, Livingston sketches a sequence he says he has seen before.
He said when liquidity is tight and funding markets become nervous, authorities tend to slow balance sheet flight or avoid stress to keep overnight rates in order. He argues that these inflection points – when liquidity stops tightening and starts to loosen – often correspond to better bitcoin performance.
He points to the repo market tensions of 2019, the emergency policy easing of 2020, and the regional bank turmoil of 2023, which he says coincided with major bitcoin advances.
Positioning, he adds, is the second pillar.
Livingston claims that the constant demand for Bitcoin spot exchange-traded funds reduces the amount of coins readily available for trading, creating a context of scarcity. He says that if policy signals change and liquidity improves from a tight starting point, a smaller tradable float can help any upside move further.
Clearly, he says, less readily available supply and more favorable liquidity can make rallies more pronounced.
