Bitcoin could be set up for a big move, author Adam Livingston said, after The Kobeissi Letter noted that bank cash at the Federal Reserve fell to about $2.93 trillion.
Kobeissi Letter is an independent macro market newsletter and widely followed X account run by analyst Adam Kobeissi.
In its Oct. 25 post, the newsletter focused on the number itself, not a price forecast for crypto. It highlighted that money banks have deposited with the Fed – often called reserve balances – have fallen towards the low end of recent ranges.
Simply put, this balance is the banking system’s checking account at the central bank. As it shrinks, dollar liquidity feels tighter and short-term funding can become more sensitive. The point of the Kobeissi letter was that this reading has implications for how the Federal Reserve thinks about its balance sheet and quantitative easing.
Livingston is a bitcoin-focused author and market commentator who writes about how liquidity cycles spill into 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” — that lay out a framework linking monetary cycles, scarcity, and digital assets.
He took the same reserve reading and built a thesis around it. In his view, the level of liquidity is approaching what he calls a danger threshold, where scarcity starts to bite and politicians pay more attention to the functioning of the market.
Livingston tapes that clamp to three forces he says hit at once.
In Livingston’s tale, three forces squeeze money at once.
First, he says, the U.S. Treasury has rebuilt its cash holdings at the Fed; when the government sells more bills to fill that account, private cash is absorbed and some shows up as fewer bank reserves.
Second, he says, the Fed shrinks its portfolio through quantitative easing — letting bonds expire without replacement — which also pulls cash out of the system.
Third, he says, other Fed liabilities such as currency in circulation grow over time, taking up balance sheet space and leaving less room for bank cash unless policy is adjusted.
That sequence is Livingston’s framework; it is consistent with how the Fed-Treasury plumbing works in practice, but the market implications he draws from it are his view.
From there, Livingston outlines a sequence he says he’s seen before.
In his view, when cash feels tight and funding markets get jumpy, officials tend to slow balance sheet drains or otherwise lean against stress to keep overnight rates in line. He argues that these turning points — when liquidity stops tightening and starts to ease — have often aligned with stronger bitcoin performance.
He points to the strain on the repo market in 2019, the easing of emergency policy in 2020 and the turmoil in regional banks in 2023, which he says coincided with major bitcoin advances.
Positioning, he adds, is the second pillar.
Livingston says that constant demand from spot bitcoin exchange-traded funds reduces the amount of coin readily available for trading, creating a scarcity in the background. He argues that if policy signals shift and liquidity improves from a tight starting point, a less tradable float could help any upward journey continue.
In plain English, he says, less readily available supply plus friendlier liquidity can make rallies sharper.
