The U.S. Treasury’s plan to refill its General Account (TGA) with $500-600 billion over the next two months is set to test one of the most fragile liquidity environments in a decade.
What Happened: According to Marcus Wu, Markets Research at Delphi Digital, the implications extend far beyond traditional finance, with stablecoins now positioned as both the first casualty and the unlikely stabilizer of this liquidity drain.
“In 2023, a $550B TGA rebuild was cushioned by over $2T in the Fed’s Reverse Repo Facility, healthy bank reserves and strong foreign Treasury demand,” Wu said. “Those buffers are now gone.”
Unlike prior cycles, every new dollar raised this fall will come directly from active market liquidity, magnifying the transmission of stress into risk assets.
Wu argues that crypto markets, particularly stablecoins, will be the first to show signs of strain.
“In 2021, stablecoin supply expanded even as the TGA rose, reflecting the abundance of post-COVID liquidity,” Wu noted.
“In 2023, stablecoin supply contracted by more than $5B and crypto stalled, showing how the drain hit digital dollar rails. In 2025, conditions are tighter still, making crypto the first place where funding stress could surface,” he added.
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Bitcoin BTC/USD may prove more resilient, but Wu warns higher-beta tokens like Ethereum are more vulnerable in thin liquidity regimes.
“If stablecoin supply contracts during this refill, ETH and other risk-curve assets are likely to see disproportionately larger declines relative to BTC, unless they have offsetting structural inflows from ETFs or corporate treasuries,” he explained.
But this cycle introduces a structural twist. Stablecoins themselves are becoming major buyers of Treasuries, a shift that could reshape both crypto and U.S. debt markets.
“Tether USDT/USD and Circle CRCL now hold over $120B in U.S. government debt, larger than many sovereigns,” Wu said. “Treasury projects stablecoin demand for bills could rise to $1T by 2028, creating a feedback loop where digital dollar rails directly absorb U.S. issuance.”
Wu outlines four phases of how the liquidity shock may play out: strength into late August, a sharp September drain as issuance front-loads, October-November fatigue with risk of stablecoin contraction, and a potential recovery as headwinds fade into December and January.
“The signal to watch is simple: stablecoin supply versus TGA balance,” Wu said. “If stablecoins expand while the TGA climbs, crypto may absorb the shock better than past cycles. If supply contracts, the drain will transmit faster and more forcefully.”
For now, Wu stresses that this is not an open-ended bearish story but a defined headwind that will shape capital flows through Q4. “The eventual completion may set the stage for the next rally. Until then, liquidity deserves more respect than headlines.”
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