Author Adam Livingston said Bitcoin could be poised for a big move after the Kobe letter noted that bank cash at the Federal Reserve fell to approximately $2.93 trillion.
The Kobeshi Letter is an independent macro market newsletter and widely followed X account run by analyst Adam Kobeshi.
In its October 25 post, the newsletter focused on the numbers, not the crypto’s price forecast. It highlights that cash deposited by banks at the Fed – often called reserve balances – has been slipping towards the lower end of recent ranges.
In simple words, that balance is the checking account of the banking system at the central bank. When it shrinks, dollar liquidity feels tight and short-term funding may become more vulnerable. The Kobeshi letter said it makes sense to read how the Federal Reserve thinks about its balance sheet and quantitative easing.
Livingston is a Bitcoin-focused author and market commentator who writes about how liquidity cycles play out in crypto. He has recently published two books – “The Bitcoin Age: Your Guide to the Future of Value, Wealth, and Power” and “The Great Harvest: AI, Labor, and the Bitcoin Lifeline” – which lay out a framework linking monetary cycles, scarcity, and the digital asset.
He took the same reserve reading and built a thesis around it. In their view, liquidity levels are approaching the danger threshold, where shortages begin to be felt and policy makers pay more attention to market functioning.
Livingston links that pressure to three forces, who he says are attacking simultaneously.
According to Livingston, three forces are simultaneously squeezing cash.
First, he says, the US Treasury is rebuilding its cash balance at the Fed; When the government sells more bills to fill that account, private cash is absorbed and a portion appears as reduced bank reserves.
Second, he says, the Fed is shrinking its portfolio through quantitative tightening — letting bonds mature without replacement — which also drains cash from the system.
Third, he says, other Fed liabilities such as currency in circulation grow over time, taking up balance-sheet space and leaving less room for bank cash unless policy is adjusted.
That sequence is Livingston’s outline; This matches how the Fed-Treasury plumbing works in practice, but the market implication he draws from it is his perspective.
From there, Livingston sketches a sequence that he says he has seen before.
In their view, when liquidity is tight and funding markets swell, authorities slow balance-sheet runoff or otherwise lean against the strain to keep overnight rates manageable. They argue that those inflection points – when liquidity stops being tight and starts tapering off – often line up with strong Bitcoin performance.
He points to the 2019 repo market stress, the 2020 emergency policy easing and the 2023 regional-bank turmoil, which he says coincide with large Bitcoin advances.
He further says, positioning is the second pillar.
Livingston says stagnant demand for spot Bitcoin exchange-traded funds reduces the amount of coin readily available for trading, creating a backdrop of scarcity. They argue that if policy signals change and liquidity improves from the tight starting point, a smaller tradable float could help offset any upside moves.
In plain English, he says, less readily available supply and friendlier liquidity could accelerate the uptrend.