In 2025, Trump's "America First" strategy will stimulate domestic economic growth through measures such as implementing trade protectionism, promoting industrial repatriation, reforming taxes, and increasing military spending. The focus is on strengthening the independence of U.S. manufacturing, technology, and energy sectors, while also enhancing export competitiveness.
The core objective of this series of policies is to drive the recovery of the U.S. economy, while reducing reliance on foreign production and capital, and enhancing the U.S.'s leading position in the global economy.
As these policies continue to be implemented, the large-scale fiscal spending and deficit problems triggered by the push for military spending and large-scale infrastructure construction cannot be ignored, coupled with the existing pressure on U.S. debt and potential inflationary expectations, investors may start to explore different risk-hedging assets. Crypto assets have become a pivot point for "Trumponomics".
Despite the continuous inflow of institutional capital, the actual capital cannot bring dopamine to the market, as investor expectations have become the main variable determining the market trend. This article is the fourth in a special series by OKG Research on Trumponomics in 2025, exploring the current dilemma of the crypto market and the market impact of large-scale liquidity release in 2025.
The Crypto Market Struggling for Liquidity
Under the push of Trumponomics, the U.S. self-sufficiency and industrial revival policies are facing high inflation and high debt pressure. Although the U.S. macro CPI/PPI data from February 12-13 did not cause a significant market fluctuation, it is because these data are still indirect surface-level data rather than direct data.
For institutional capital, the market is more about digesting previous expectations. The real market positive news appeared during the wave of Treasury liquidity release in early February, and this actual operation injected substantive momentum into the market, driving the rise of risk assets.
Specifically, the inflow of institutional investors is more like the landing of expectations and the re-allocation of existing market capital based on this. In the macro report released by OKG Research last weekend, the author pointed out that for the market, the "limited liquidity" and the "precise re-allocation" are currently concentrated on Bitcoin, due to the change in the trading behavior of the main position holders.
Institutional investors tend to hold long-term and concentrate, so the flow of ETFs rarely spills over to other assets, which is one of the main reasons why the "altcoin season" that investors have been looking forward to has not yet arrived.
However, although the minutes of the U.S. Federal Reserve meeting on February 19 emphasized a stance of not being in a hurry to cut interest rates, this did not have a significant impact on the U.S. stock market. Through observation of the market, the expectation of no rate cuts seems to have been fully digested, or the market has already begun to pre-trade the expectation of "pausing or slowing the balance sheet reduction".
But it cannot be denied that regardless of how expectations change, they are based on the macroeconomic situation, and expectations do not equate to "gambling" on the macro. What we have observed so far is that the U.S. Federal Reserve's monetary policy will still face two major pressures: high inflation and high debt levels will make the U.S. Federal Reserve's monetary policy more cautious, meaning that even in the face of economic slowdown, the U.S. Federal Reserve may avoid overly loose monetary policy.
A New Round of Crypto Market 'Liquidity Materialization' May Have Arrived
Although currently, the U.S. does not seem to be implementing large-scale quantitative easing (QE) in 2025 like in 2018 and 2020, i.e., injecting liquidity into the market by purchasing government bonds and debt assets to stimulate economic growth. However, in the short term, to address the U.S. debt ceiling issue, the TGA has already started injecting liquidity into the market this week.
Historically, whenever the U.S. government faces a debt ceiling problem, the market often sees short-term liquidity release (from the TGA), which in turn drives up the prices of various asset classes, especially risk assets.
The U.S. Treasury's "Treasury General Account" (TGA) is an important tool for the government to manage daily cash flow. The balance of this account is adjusted based on the government's revenue and expenditure. When facing debt ceiling constraints, the Treasury typically reduces the supply of government bonds and uses the funds in the TGA account to maintain the government's normal operations.
In fact, changes in the TGA balance directly affect the liquidity of the financial market. Each time there is a large-scale liquidity release, risk assets, especially crypto assets, will see a corresponding price increase. Like the period from mid-2020 to the end of 2021 (which overlapped with monetary policy), Bitcoin rose about 6 times. During this period, the growth of U.S. M2 also reached over 40%, which was the fastest 5-year M2 growth period.
During the period from the first half of 2022 to the first half of 2023, the Bitcoin price performance showed a certain lag during the TGA liquidity release phase. In this phase, the price of Bitcoin increased by about 100% from the lowest point to the highest point, however, from the start of the liquidity release to the end of the phase, the overall Bitcoin price increase was around 10%.
According to the latest report from Goldman Sachs, the scale of the first round of short-term TGA liquidity injection in 2025 is expected to be around $150 billion to $250 billion. It is expected to continue until the summer until a new agreement is reached. This is the first round of foreseeable liquidity release. Other institutions have also analyzed that the first round is expected to inject a total of about $600 billion in liquidity.
According to the latest macro analysis report from Bank of America (BofA), the cash holding level of global fund managers fell to a low of 3.5% in February 2025, reflecting an increase in investors' risk appetite - they are more inclined to stocks rather than cash and bonds.
This rise in risk appetite coincides with the timing of the TGA liquidity release. In other words, this round of short-term liquidity injection is expected to flow mainly into the risk asset market, including crypto assets. The direction of investor capital flows and their preference for risk assets may further drive the rise of the crypto market.
Not QE, but better than QE?
Within the framework of Trumponomics, the strategy of promoting America First not only relies on trade protectionism and industrial repatriation, but also requires the strong support of fiscal and monetary policies. In order to achieve self-sufficiency and stimulate the domestic economy, the Trump administration is more inclined to use fiscal tools, such as the TGA (Treasury General Account), as well as liquidity injections through monetary policy tools when necessary, to drive economic growth.
Unlike the long-term monetary policy tool of quantitative easing (QE), the liquidity release of TGA is a one-time, short-term operation. By reducing government debt issuance and using funds from the TGA account to address short-term liquidity needs, the government can quickly inject liquidity into the market. Although this injection can drive the rise of risk assets in the short term, due to the temporary nature of the TGA fund injection, the liquidity may be quickly withdrawn in the later stage, which may lead to a tightening effect on market liquidity.
In contrast, QE is a means by which the Federal Reserve expands its asset portfolio (such as government bonds) to continuously inject funds into the market, aiming to stabilize the financial market and stimulate economic growth. The long-term and continuous nature of QE is in stark contrast to the short-term nature of TGA. To achieve the goal of industrial revitalization and enhancing competitiveness, the Trump administration needs to use TGA to inject liquidity in the short term, while relying on the loose monetary policy measures in the long term to support the economy.
However, the short-term liquidity release of TGA may also conflict with the Federal Reserve's monetary tightening direction, and in the case of increasing government debt, it may cause market uncertainty, thereby affecting the implementation of the overall economic policy.
In summary, the Trump administration's short-term liquidity release through TGA has injected new vitality into the market. Although this release is not a long-term monetary easing policy like quantitative easing (QE), it is sufficient to drive the rise of risk assets such as crypto assets in the short term. For the crypto market, the short-term capital inflow is undoubtedly a rare opportunity, but the subsequent liquidity tightening effect and the US debt issue still need to be paid attention to.
Long-term economic stability still depends on the effective coordination of fiscal and monetary policies under the Trumponomics framework. In the coming months, the monetary and fiscal policy tools adopted based on this framework will largely determine the performance of the crypto market.
