Why an $88 billion bank reserve drop doesn’t prove a Bitcoin liquidity squeeze – yet

Bitcoin’s quarter-end liquidity signal changes direction depending on which reserve measure is used. Federal Reserve data released Oct. 1 show bank reserves falling $88.236 billion between Sept. 23 and Sept. 30 Wednesday snapshots, while their weekly average rose $17.897 billion.

Reserves are balances banks hold at the Federal Reserve to make and receive payments. Their level matters for dollar financing, but a reserve chart alone cannot establish whether pressure reached Bitcoin. The balance-sheet decline is largely accounted for by Treasury cash and reverse repos, predominantly involving foreign official accounts. September 30’s median cost of Treasury-backed overnight borrowing was 3.90%, within the range of the five latest observed readings.

September’s quarter-end therefore offers a test of the measurements behind a liquidity thesis. An endpoint balance, an average balance and a funding price describe different aspects of the system. Treating them as interchangeable can turn the same week into opposing market signals.

The Wednesday reserve series fell from $2.969922 trillion on Sept. 23 to $2.881686 trillion on Sept. 30. The weekly-average series rose from $2.930193 trillion to $2.948090 trillion for the weeks ending on those dates.