Bitcoin Squeeze Unproven Despite $88B Drop in Fed Reserves

Frequently asked questions

1. How could bank reserves fall on Wednesday while their weekly average rose?

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   The Wednesday series compares balances on two dates. The weekly-average series compares daily balances across two weeks, so a lower endpoint can coexist with a higher average.

2. What accounted for much of the Wednesday reserve decline?

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   The decline reconciles with changes elsewhere in the Fed’s accounts. Treasury cash rose $36.729 billion, and total reverse repos rose $41.158 billion, mostly in foreign official and international accounts.

3. Were the increased reverse repos mainly domestic facility use?

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   No. Most of the increase in total reverse repos was in foreign official and international accounts, so treating the entire balance as domestic facility use would misstate the counterparties.

4. What did overnight borrowing costs show at quarter-end?

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   The Sept. 30 SOFR median was 3.90%, matching the Fed’s interest rate on reserve balances and falling within the range of the five latest observed medians. It does not represent the rate every borrower paid.

5. What evidence would connect the reserve move to Bitcoin funding pressure?

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   Subsequent funding rates and dated Bitcoin-market financing, futures-basis or liquidity observations over a comparable period would offer a more direct test. The reserve figures alone do not establish that link.