I recently saw a new data point: the U.S. Treasury General Account (TGA) balance surged to nearly $1 trillion in early 2026. Crypto prices have not risen much lately, could this be related?
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There is a connection, but you cannot directly equate "TGA rise" to "market liquidity reduced by X billion USD". This number only tells you "part of the cash has been pulled out of the financial market". The exact amount of drained liquidity and its impact depends on who buys the newly issued government bonds.
Step 1: Understand what TGA is and how it "drains liquidity"
Goal: Grasp the direct relationship between TGA balance changes and market liquidity.
The TGA is a demand deposit account that the U.S. Treasury opens at the Federal Reserve. All Treasury funds are stored here: the balance rises when the Treasury receives tax payments or raises funds via bond issuance, and falls when the Treasury pays social security benefits or makes other fiscal expenditures.
The key point is: When the Treasury issues a large number of bonds and leaves the cash in the TGA account, this portion of money is temporarily "frozen" out of the financial system. Conversely, when the Treasury spends this money, the TGA balance drops, and the cash flows back to the market again.
But the actual situation is more nuanced. During the U.S. government shutdown at the end of 2025, the TGA balance jumped from about $300 billion to $1 trillion in 3 months. This was not because the Treasury was actively collecting funds, but because the government spent far less than planned during the shutdown: the Treasury kept issuing bonds to raise funds, but the cash got stuck in the account and could not be spent, creating a passive "siphon effect" that drained market liquidity.
Completion check: You will understand that a rising TGA does not always mean active tightening from the Treasury - it can also be a backlog of funds caused by "planned spending that never happened".
Step 2: Calculate net liquidity changes, do not only look at the TGA number
Goal: Use a more accurate formula to judge how much actual market liquidity has been drained.
What really affects the usable funds in the market is not the increase of the TGA balance itself, but the net liquidity calculated by subtracting TGA and the Overnight Reverse Repo (ON RRP) balance from the Federal Reserve's total assets.
This logic was already proven back in 2021. At that time, the TGA account dropped rapidly and released a large amount of liquidity, but the ON RRP scale also surged at the same time, locking the released cash back. The result was that the Fed was still expanding its asset holdings, but the reverse repo on the liability side had already produced a "quantitative tightening" effect in practice.
Back to the 2025-2026 TGA surge scenario: part of the market liquidity has indeed been drained - bank reserves fell from about $3.89 trillion to $2.85 trillion, close to 10% of U.S. GDP, which has touched the "safety bottom line of the banking system's liquidity".
But note, the drained money does not all come from the "active, circulating" part of market funds. During the 2022-2023 Fed quantitative tightening that reduced its balance sheet by $1 trillion, liquidity tightening was mainly reflected in the drop of ON RRP balance (from over $2 trillion to around $1 trillion), while bank reserves were not significantly affected. This shows that if there is "redundant liquidity" in the market (such as funds piled up in the ON RRP facility), the impact of a rising TGA will be absorbed by this part first, instead of directly pressuring risk assets.
Completion check: You can distinguish the different impact paths of a rising TGA on "active liquidity" and "redundant liquidity".
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Step 3: Confirm who buys the new bonds - this determines how big the impact is
Goal: Use 2025-2026 real market data to judge the actual impact of a rising TGA on your investment positions.
[What to do]: Figure out who the final buyers of this batch of newly issued government bonds are.
[How to do it]: In August 2025, the U.S. Treasury auctioned a record-high $100 billion 4-week government bond at one time, to fill a roughly $500 billion funding gap in the TGA. For such a large supply, the buyers will decide how severely liquidity is drained:
If money market funds take up the new bonds: They mostly use the "redundant" funds piled up in the Fed's ON RRP facility. This scenario brings the smallest actual impact on the market - the cash is only moved from one "pocket" of the Fed to another, and does not disappear from the total market money supply.
If the banking system takes up the new bonds: Banks need to use their reserves to buy the bonds, which will withdraw deposits from the banking system and directly reduce reserve levels, creating the most direct tightening effect on market liquidity. But in early 2026, bank reserves were already close to the safety bottom line, so banks have very limited capacity to take on more new bonds.
If non-bank institutions take up the new bonds: The impact falls between the above two scenarios. Non-bank institutions will sell other assets to free up cash, which may trigger sell-offs of other assets such as high-yield bonds or stocks.
Completion check: You can judge which part of the market the impact of a rising TGA is most likely to fall on in the current environment.
Common misconception: Many people treat "rising TGA balance" as an independent negative factor, but in fact, the scale of Treasury bond issuance and the market's capacity to absorb them are the decisive variables. After the $100 billion short-term bond issuance in August 2025, the 10-year U.S. Treasury yield once surged to 5%, which is the real transmission path that affects crypto prices - TGA itself is not the direct cause, the interest rate hike it triggers is.
Validation method to confirm your judgment: Bookmark the data page for "the Fed's balance sheet liability structure". Next time you see news about TGA balance changes, don't just look at the number, first check the trend of the ON RRP balance and bank reserves - these two data will tell you "where the drained cash came from".
Next step action: Check the TGA balance, ON RRP balance and bank reserves together in your weekly macro market review. If TGA rises while ON RRP falls at the same time, it means the "active circulating cash" in the market has not been touched yet, and the impact is relatively limited; if TGA rises, ON RRP is already very low, and reserves are also falling, that is the real liquidity tightening signal you need to pay close attention to.
