1 month ago
25
by Hedy Bi, Lola Wang | OKG Research
In 2025, the “America First” strategy implemented by Trump aims to stimulate domestic economic growth through trade protectionism, encouraging industrial return, tax reform, and increased military spending. The focus is on strengthening the independence of American manufacturing, technology, and energy sectors, while enhancing export competitiveness. The core goal of these policies is to drive economic recovery in the U.S., reduce dependence on foreign production and capital, and enhance America’s dominant position in the global economy.
As these policies continue to advance, the challenges posed by large fiscal spending and deficits, triggered by increased military expenditures and large-scale infrastructure construction, cannot be ignored. Combined with the existing pressure on U.S. debt and potential inflation expectations, investors may begin to seek alternative risk-hedging assets. Cryptocurrency has thus become a key pivot for Trump’s economic approach.
Despite continuous institutional capital inflows, the actual funds have not provided the dopamine boost to the market, as investor expectations have become the primary variable determining market direction. This article, part of OKG Research’s 2025 special series on Trump Economics, is the fourth installment, exploring the current challenges in the cryptocurrency market and the market impact of large-scale liquidity release in 2025.
The Struggle for Liquidity in the Crypto Market
Under Trump Economics, the U.S.’s self-sufficiency and industrial revival policies face pressures from high inflation and high debt. Although the U.S. macro CPI/PPI data for February 12–13 did not trigger significant market volatility, this is because these data are indirect surface-level figures rather than direct ones. For institutional investors, the market is primarily digesting prior expectations. The true market stimulus emerged in early February with the liquidity release from the Treasury Department, which injected substantial momentum into the market, pushing up risk assets.
Specifically, institutional inflows resemble the realization of expectations and the redistribution of existing market funds based on them. In a recent macro report published by OKG Research, the author mentioned that for the market, “limited liquidity” and “precise reallocation” are currently concentrated on Bitcoin, due to a shift in the behavior of the primary holders behind it. Institutional investors tend to hold long-term and concentrated positions, so ETF flows rarely spill into other assets, which is one of the main reasons why the much-anticipated “altcoin season” is delayed.
However, despite the Federal Reserve’s meeting minutes on February 19 emphasizing the stance of not rushing to cut interest rates, this did not cause significant impact on U.S. stocks. Observing the market, the expectation of no rate cuts seems to have been fully priced in, or the market has already begun to trade in anticipation of a “pause or slow balance sheet reduction.”
Nonetheless, it cannot be denied that any changes in expectations are based on the macroeconomic situation, and expectations do not equate to a “gamble” on the macro economy. So far, what we observe is that the Federal Reserve’s monetary policy will face two significant pressures: high inflation and high debt levels, which will make the Fed’s monetary policy more cautious. This means that even in the face of slowing economic growth, the Fed may avoid excessively loose monetary policies.
A New Round of Cryptocurrency Market “Liquidity Manifestation” May Have Arrived
Although there is no large-scale quantitative easing (QE) like in 2018 and 2020, where the government purchases U.S. Treasuries and government debt assets to inject liquidity into the market, short-term liquidity injections are already occurring this week due to the U.S. debt ceiling issue.
Historically, whenever the U.S. government faces a debt ceiling issue, the market often sees short-term liquidity releases (from the Treasury General Account or TGA), which then drive up asset prices, particularly risk assets. The U.S. Treasury’s TGA is an essential tool for managing the government’s daily cash flow. The balance in this account is adjusted according to the government’s income and expenditure. When facing debt ceiling limits, the Treasury typically reduces Treasury bond issuance and instead uses funds from the TGA to maintain normal government operations.
In fact, changes in the TGA balance directly impact financial market liquidity. Every time liquidity is released on a large scale, risk assets, especially cryptocurrencies, typically see price increases. From mid-2020 to the end of 2021 (a period also characterized by monetary policy easing), Bitcoin increased approximately 6 times. During this period, U.S. M2 growth also reached over 40%, marking the fastest M2 growth in 5 years.
From the first half of 2022 to the first half of 2023, Bitcoin showed some lag in performance during the TGA liquidity release period. In this phase, Bitcoin’s price increased by about 100% from the lowest to the highest point, but from the start of liquidity release to the end of the phase, the overall increase in Bitcoin’s price was about 10%.
According to Goldman Sachs’ latest report, the first round of short-term TGA liquidity injections in 2025 is expected to be between $150 billion and $250 billion, continuing until the summer, when a new agreement is likely to be reached. This is the first foreseeable liquidity release. Other institutions have analyzed that the total liquidity injection in the first round may be approximately $600 billion.
According to Bank of America’s latest macro analysis report, in February 2025, global fund managers’ cash holdings dropped to a low of 3.5%, reflecting an increased risk appetite — they are more inclined toward stocks than cash and bonds. This rise in risk appetite coincides with the timing of the current TGA liquidity release. In other words, this round of short-term liquidity injection is expected to flow primarily into risk asset markets, including cryptocurrencies. The direction of investor capital flow and their preference for risk assets may further drive up the cryptocurrency market.
Not QE, But Better Than QE?
Under the framework of Trump Economics, promoting the “America First” strategy relies not only on trade protectionism and industrial return policies but also on strong support from fiscal and monetary policies. To achieve self-sufficiency and stimulate domestic economic growth, the Trump administration is more inclined to use fiscal tools, such as the TGA (Treasury General Account), and, when necessary, use monetary policy tools to inject liquidity to stimulate economic growth.
Unlike quantitative easing (QE), which is a long-term monetary policy tool, TGA liquidity release is a one-time, short-term operation. By reducing Treasury bond issuance and using funds from the TGA account to meet short-term liquidity needs, the government can quickly inject liquidity into the market. While this injection can drive up risk assets in the short term, the temporary nature of TGA funds means that liquidity may be rapidly withdrawn later, potentially causing liquidity tightening in the market.
In contrast, QE is a long-term monetary policy tool where the Fed purchases assets (such as Treasuries) and expands its balance sheet to continuously inject funds into the market, aiming to stabilize financial markets and stimulate economic growth. The long-term and sustained nature of QE sharply contrasts with the short-term nature of TGA. To achieve industrial revival and enhanced competitiveness, the Trump administration requires short-term liquidity injections through the TGA, while relying on loose monetary policies in the long term to support the economy. However, the short-term liquidity release from the TGA may conflict with the Fed’s monetary tightening direction, and with the increasing government debt, it could create uncertainty in the market, impacting the execution of overall economic policies.
In summary, the Trump administration has injected new vitality into the market through TGA short-term liquidity releases. Although this release is not as long-lasting as quantitative easing (QE), it is sufficient to drive up risk assets such as cryptocurrencies in the short term. For the cryptocurrency market, short-term capital inflows are undoubtedly a rare opportunity, but the potential liquidity tightening effect and U.S. debt issues still need attention. Long-term economic stability still depends on the effective coordination of fiscal and monetary policies under the framework of Trump Economics. In the coming months, the monetary and fiscal policy tools employed under this framework will largely determine the performance of the cryptocurrency market.
Introduction to Trumponomics:
At OKG Research, we recognize the growing significance of Donald Trump’s economic policies in 2025, particularly their impact on the crypto market. In this Trumpomics series, we examine how Trump’s second term — through tax reform, regulation, and trade policies — will shape Bitcoin and other crypto assets. As institutional adoption and regulatory frameworks evolve, Trump’s economic agenda will be a key driver for the future of cryptocurrencies. Through this series, OKG Research provides crucial insights into how these factors will influence market trends and investment strategies in the new economic era.
Other articles in the series include:
- Trumponomics #1:
Trump Returns: Bitcoin, Oil, and Gold in the New Economic Era
Exploring Bitcoin’s impact on the international financial landscape. - Trumponomics #2:
Trump Is Back: Stablecoins vs. Bitcoin — Who Can Solve the U.S. Debt Crisis?
Examining how blockchain and crypto tools could address the challenges of a $36 trillion U.S. debt market while strengthening the dollar’s dominance. - Trumponomics #3:
Trump Takes Office, but Strategy Stops Buying Bitcoin?
Analysing the challenges faced by MicroStrategy (formerly MicroStrategy Inc.) under the new policies during Trump’s presidency, and analyzes the impact of Bitcoin strategy on the industry.
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