Treasury’s cash balance nears $1 trillion while Bitcoin awaits a crucial market signal

According to CryptoSlate, Treasury officials and market participants discussed at a New York Fed conference whether the government should lend excess cash into the overnight repo market. Treasury announced no repo-lending program, amount, or timetable during the discussion.

In May, the Treasury Borrowing Advisory Committee modeled what would happen if Treasury lent some of its cash overnight against Treasury securities. The modeling showed that money would leave the Treasury General Account while bank reserves would rise. However, a presenting committee member estimated that investing excess cash might produce only 0 to 2 basis points of economic return for the government.

Roberto Perli, who manages the Fed’s System Open Market Account, stated that money markets had absorbed a large recent supply of bills without acute repo funding pressure. CryptoSlate noted that any benefit for Bitcoin would be indirect, depending on actual funding changes, and that higher bank reserves do not by themselves establish cheaper funding, fresh Bitcoin demand, or a price effect.