by Hedy Bi, Lola Wang | OKG Analysis
In 2025, the “America First” technique carried out by Trump goals to stimulate home financial development by way of commerce protectionism, encouraging industrial return, tax reform, and elevated navy spending. The main focus is on strengthening the independence of American manufacturing, know-how, and power sectors, whereas enhancing export competitiveness. The core aim of those insurance policies is to drive financial restoration within the U.S., cut back dependence on overseas manufacturing and capital, and improve America’s dominant place within the world economic system.
As these insurance policies proceed to advance, the challenges posed by massive fiscal spending and deficits, triggered by elevated navy expenditures and large-scale infrastructure building, can’t be ignored. Mixed with the present strain on U.S. debt and potential inflation expectations, traders might start to hunt different risk-hedging belongings. Cryptocurrency has thus develop into a key pivot for Trump’s financial strategy.
Regardless of steady institutional capital inflows, the precise funds haven’t supplied the dopamine enhance to the market, as investor expectations have develop into the first variable figuring out market route. This text, a part of OKG Analysis’s 2025 particular sequence on Trump Economics, is the fourth installment, exploring the present challenges within the cryptocurrency market and the market influence of large-scale liquidity launch in 2025.
The Battle for Liquidity within the Crypto Market
Beneath Trump Economics, the U.S.’s self-sufficiency and industrial revival insurance policies face pressures from excessive inflation and excessive debt. Though the U.S. macro CPI/PPI information for February 12–13 didn’t set off vital market volatility, it’s because these information are oblique surface-level figures reasonably than direct ones. For institutional traders, the market is primarily digesting prior expectations. The true market stimulus emerged in early February with the liquidity launch from the Treasury Division, which injected substantial momentum into the market, pushing up threat belongings.
Particularly, institutional inflows resemble the belief of expectations and the redistribution of present market funds based mostly on them. In a current macro report printed by OKG Analysis, the writer talked about that for the market, “restricted liquidity” and “exact reallocation” are at the moment focused on Bitcoin, as a consequence of a shift within the habits of the first holders behind it. Institutional traders have a tendency to carry long-term and concentrated positions, so ETF flows not often spill into different belongings, which is likely one of the principal the explanation why the much-anticipated “altcoin season” is delayed.
Nonetheless, regardless of the Federal Reserve’s assembly minutes on February 19 emphasizing the stance of not dashing to chop rates of interest, this didn’t trigger vital influence on U.S. shares. Observing the market, the expectation of no charge cuts appears to have been absolutely priced in, or the market has already begun to commerce in anticipation of a “pause or sluggish stability sheet discount.”
Nonetheless, it can’t be denied that any modifications in expectations are based mostly on the macroeconomic scenario, and expectations don’t equate to a “gamble” on the macro economic system. To this point, what we observe is that the Federal Reserve’s financial coverage will face two vital pressures: excessive inflation and excessive debt ranges, which can make the Fed’s financial coverage extra cautious. Which means even within the face of slowing financial development, the Fed might keep away from excessively unfastened financial insurance policies.
A New Spherical of Cryptocurrency Market “Liquidity Manifestation” Might Have Arrived
Though there isn’t a large-scale quantitative easing (QE) like in 2018 and 2020, the place the federal government purchases U.S. Treasuries and authorities debt belongings to inject liquidity into the market, short-term liquidity injections are already occurring this week as a result of U.S. debt ceiling challenge.
Traditionally, at any time when the U.S. authorities faces a debt ceiling challenge, the market typically sees short-term liquidity releases (from the Treasury Normal Account or TGA), which then drive up asset costs, significantly threat belongings. The U.S. Treasury’s TGA is a vital device for managing the federal government’s each day money circulation. The stability on this account is adjusted based on the federal government’s earnings and expenditure. When going through debt ceiling limits, the Treasury usually reduces Treasury bond issuance and as a substitute makes use of funds from the TGA to take care of regular authorities operations.
In truth, modifications within the TGA stability immediately influence monetary market liquidity. Each time liquidity is launched on a big scale, threat belongings, particularly cryptocurrencies, usually see value will increase. From mid-2020 to the tip of 2021 (a interval additionally characterised by financial coverage easing), Bitcoin elevated roughly 6 instances. Throughout this era, U.S. M2 development additionally reached over 40%, marking the quickest M2 development in 5 years.
From the primary half of 2022 to the primary half of 2023, Bitcoin confirmed some lag in efficiency throughout the TGA liquidity launch interval. On this part, Bitcoin’s value elevated by about 100% from the bottom to the very best level, however from the beginning of liquidity launch to the tip of the part, the general improve in Bitcoin’s value was about 10%.
In response to Goldman Sachs’ newest report, the primary spherical of short-term TGA liquidity injections in 2025 is predicted to be between $150 billion and $250 billion, persevering with till the summer time, when a brand new settlement is prone to be reached. That is the primary foreseeable liquidity launch. Different establishments have analyzed that the overall liquidity injection within the first spherical could also be roughly $600 billion.
In response to Financial institution of America’s newest macro evaluation report, in February 2025, world fund managers’ money holdings dropped to a low of three.5%, reflecting an elevated threat urge for food — they’re extra inclined towards shares than money and bonds. This rise in threat urge for food coincides with the timing of the present TGA liquidity launch. In different phrases, this spherical of short-term liquidity injection is predicted to circulation primarily into threat asset markets, together with cryptocurrencies. The route of investor capital circulation and their desire for threat belongings might additional drive up the cryptocurrency market.
Not QE, However Higher Than QE?
Beneath the framework of Trump Economics, selling the “America First” technique depends not solely on commerce protectionism and industrial return insurance policies but in addition on robust help from fiscal and financial insurance policies. To realize self-sufficiency and stimulate home financial development, the Trump administration is extra inclined to make use of fiscal instruments, such because the TGA (Treasury Normal Account), and, when needed, use financial coverage instruments to inject liquidity to stimulate financial development.
In contrast to quantitative easing (QE), which is a long-term financial coverage device, TGA liquidity launch is a one-time, short-term operation. By lowering Treasury bond issuance and utilizing funds from the TGA account to fulfill short-term liquidity wants, the federal government can shortly inject liquidity into the market. Whereas this injection can drive up threat belongings within the quick time period, the momentary nature of TGA funds signifies that liquidity could also be quickly withdrawn later, probably inflicting liquidity tightening out there.
In distinction, QE is a long-term financial coverage device the place the Fed purchases belongings (resembling Treasuries) and expands its stability sheet to constantly inject funds into the market, aiming to stabilize monetary markets and stimulate financial development. The long-term and sustained nature of QE sharply contrasts with the short-term nature of TGA. To realize industrial revival and enhanced competitiveness, the Trump administration requires short-term liquidity injections by way of the TGA, whereas counting on unfastened financial insurance policies in the long run to help the economic system. Nonetheless, the short-term liquidity launch from the TGA might battle with the Fed’s financial tightening route, and with the growing authorities debt, it may create uncertainty out there, impacting the execution of general financial insurance policies.
In abstract, the Trump administration has injected new vitality into the market by way of TGA short-term liquidity releases. Though this launch just isn’t as long-lasting as quantitative easing (QE), it’s enough to drive up threat belongings resembling cryptocurrencies within the quick time period. For the cryptocurrency market, short-term capital inflows are undoubtedly a uncommon alternative, however the potential liquidity tightening impact and U.S. debt points nonetheless want consideration. Lengthy-term financial stability nonetheless is determined by the efficient coordination of fiscal and financial insurance policies beneath the framework of Trump Economics. Within the coming months, the financial and financial coverage instruments employed beneath this framework will largely decide the efficiency of the cryptocurrency market.