Fed reserve drop does not prove a Bitcoin liquidity squeeze
Federal Reserve data released on 1 October show bank reserves falling $88.236 billion between the Wednesday snapshots of 23 September and 30 September, from $2.969922 trillion to $2.881686 trillion. The same H.4.1 release shows the weekly average of reserve balances rising $17.897 billion over the weeks ending on those dates, from $2.930193 trillion to $2.948090 trillion. CryptoSlate, which reported the figures, said the divergence means a quarter-end reserve chart cannot by itself establish that pressure reached Bitcoin, because the two series measure different things over different windows.
One series compares balances on two Wednesdays; the other compares averages of daily figures across two weeks, so a lower final observation can coexist with a higher average. The Treasury General Account, the government's account at the Fed, illustrates the same problem: its Wednesday balance rose $36.729 billion to $984.046 billion, while its weekly average fell $28.410 billion to $948.674 billion, according to the same data. CryptoSlate cautions that mixing a Wednesday reserve decline with an average Treasury decline combines observations from different windows, and that a chart labelled weekly still needs a second question: whether each point is a weekly average or a balance observed once a week.
The release and the one before it provide an accounting bridge for the decline. Factors supplying reserves fell $4.650 billion, while factors absorbing funds outside reserve balances rose $83.586 billion, together reconciling the $88.236 billion fall. Total reverse repos rose $41.158 billion to $361.883 billion, but $350.344 billion of that, up $30.080 billion, sat with foreign official and international accounts, while the remaining "others" category rose $11.078 billion to $11.539 billion. Currency in circulation rose $373 million, other non-reserve deposits $3.001 billion, and other liabilities and capital $2.317 billion. CryptoSlate notes that describing the whole reverse-repo balance as domestic overnight usage would misidentify both the counterparties and the facility's size, and that gross Treasury issuance is not an equal-sized withdrawal from reserves.
Funding prices offered a separate and more muted test. The New York Fed's latest SOFR observation at the time still covered 30 September and stood at 3.90 per cent, matching the interest rate on reserve balances; the five latest observed medians ranged from 3.88 per cent to 3.90 per cent, and the 99th-percentile rate was 3.99 per cent on $3.230 trillion of underlying transactions. The H.4.1 release reported $1.2 billion of outstanding repo agreements on 30 September. CryptoSlate notes that SOFR is a volume-weighted median describing the middle of observed dollar volume rather than the rate every borrower could obtain, and that the standing repo facility's 4.00 per cent rate, two daily operation windows and $40 billion limit per counterparty, per eligible security type, per operation mean access depends on eligibility. Domestic overnight reverse-repo usage fell from $11.539 billion to $350 million on 1 October, which the report said shows that facility's increase unwound sharply, not that aggregate reserves rebounded.
What would connect the balance-sheet movement to Bitcoin? CryptoSlate argues the case would be stronger if borrowing costs stayed elevated relative to the Fed's settings across subsequent observations, with pressure visible beyond a single median, and would require dated exchange or instrument-level funding, futures-basis or market-depth evidence over a comparable window. Even simultaneous Bitcoin weakness and higher repo rates would leave causation unresolved. On the figures available, the report concludes, the data establish neither a Bitcoin financing shock nor its absence: they show a reserve decline that reconciles with changes elsewhere in the Fed's accounts, a weekly average moving in the opposite direction, and a secured-cash median still at the rate on reserve balances.
