Bitcoin May Be Near a Breakout as Bank Reserves Hit Critical Levels, Analyst Warns
Bitcoin could be nearing a major inflection point as U.S. bank reserves at the Federal Reserve slide toward what market analyst Adam Livingston calls a “danger zone” for liquidity — a shift he says has historically favored Bitcoin rallies.
Bank Reserves Fall to $2.93 Trillion
In an Oct. 25 update, The Kobeissi Letter, a widely followed macro newsletter run by Adam Kobeissi, reported that bank cash at the Fed had dropped to roughly $2.93 trillion. The publication didn’t issue a crypto forecast but underscored that reserve balances — essentially the deposits banks hold with the central bank — have been trending toward the lower end of recent ranges.
Shrinking reserves typically indicate tighter dollar liquidity, which can heighten short-term funding stress and influence how the Federal Reserve approaches quantitative tightening.
Livingston Connects Liquidity Cycles to Bitcoin
Livingston, author of “The Bitcoin Age” and “The Great Harvest,” interprets the same data as a potential turning point. He argues that reserves are approaching a critical threshold that could prompt policymakers to reconsider balance-sheet runoff.
He attributes the tightening to three key factors:
- The U.S. Treasury’s cash rebuild at the Fed, which drains liquidity as more bills are issued.
- Ongoing quantitative tightening, as the Fed lets bonds mature without reinvestment.
- The steady growth of other Fed liabilities, such as currency in circulation, which reduces space for bank reserves.
Livingston believes similar dynamics have played out before major market pivots — notably during the 2019 repo crisis, the 2020 pandemic easing, and the 2023 regional bank turmoil — each time preceding notable Bitcoin upswings.
“When liquidity tightens to the point of strain, the Fed often steps in,” he said. “Those inflection moments, when easing begins, tend to coincide with strong Bitcoin performance.”
ETF Flows and Supply Dynamics Add Fuel
The analyst also points to steady spot Bitcoin ETF demand as an additional bullish factor, noting that coins absorbed by funds reduce circulating supply.
“With less available Bitcoin and liquidity conditions poised to ease, even modest policy shifts could amplify upside,” Livingston said.
He summarized the setup succinctly: “A scarce asset meeting a liquidity turning point — that’s when Bitcoin tends to move hardest.”
