XRP has taken a hit alongside the broader crypto market due to a looming liquidity crunch caused by the U.S. Treasury General Account (TGA) rebuild, not mere anticipation surrounding Fed Chair Powell’s speech at Jackson Hole.

How the Treasury General Account Is Disrupting Markets

Markets are reeling not because of inflation anxieties or speculative fears ahead of central bank commentary, but because the U.S. government’s TGA is drawing liquidity away from risk assets like XRP and Bitcoin. The TGA, a checking account at the Federal Reserve used for processing tax receipts and government payments, recently began accumulating funds rapidly—as the U.S. Treasury plans significant debt issuance in the coming months to replenish its balance.

This liquidity drain is already showing strong ripple effects. Bitcoin (BTC) has dropped over 8% from its peak to $113,500, while major altcoins such as Ethereum (ETH), XRP, and Solana (SOL) have also seen notable corrections. According to CoinDesk 80 Index, the broader crypto market has declined by 13% since last Thursday.

Federal Reserve’s TGA buildup is draining liquidity from markets, impacting XRP and other digital assets.

Wall Street has not been spared either. The Nasdaq index fell by nearly 1.4% to 23,384, reversing gains after touching record levels just a week ago. While many blamed investor caution ahead of the Jackson Hole symposium, analysts assert that the TGA liquidity squeeze is the real cause.

TGA Refill and Its Implications for XRP

David Duong, head of institutional research at Coinbase, emphasized on X that “Jackson Hole and PPI are just excuses for market players to trim risk ahead of the U.S. Treasury’s TGA liquidity drain (~$400B) in the weeks ahead. This explains why bitcoin has lost trend alongside many equity names. But we think the path forward looks clearer in September.”

The TGA acts similarly to a regular savings account: it fills when the government collects income and empties when payments are made. During fiscal uncertainty, the Treasury usually reduces the TGA to inject liquidity, bolstering markets. However, when rebuilding the account, it does so by issuing excess debt, effectively pulling money out of circulation—and from risk assets like XRP and crypto markets.

This ongoing TGA rebuild is unique because it comes during a particularly fragile period for global markets. From late July to now, the TGA balance has surged from $320 billion to over $500 billion, per MacroMicro. Analysts at Seeking Alpha project further issuance of $500–$600 billion in new government debt over the next couple of months.

Structural Risks Amplify the Crypto Downtrend

Delphi Digital’s analyst Marcus Wu pointed out that financial markets this year have a thinner cushion compared to previous TGA rebuilds. In 2023, ample bank reserves, robust foreign demand for U.S. debt, and over $2 trillion in the Fed’s Reverse Repo (RRP) facility softened the blow of TGA adjustments.

Wu noted, “Compared to 2023, the financial system now faces fewer liquidity buffers, tighter balance sheet capacity, and a diminished foreign bid for Treasuries.” With the Federal Reserve still holding its tightening stance, the imbalance between debt supply and buyer demand could raise funding costs and exert downward pressure on both equities and cryptocurrencies like XRP.

What’s threatening XRP now is more than market sentiment—it’s a shrinking pool of macro liquidity. As government debt issuance ramps up, investors are pulled toward safer assets, reducing appetite for crypto exposure. XRP, functioning within the Ripple ecosystem, thrives on broad liquidity and investment activity, both of which are strained at the moment.

Wu further explained that the last large-scale TGA boost in late 2024 was buffered by favorable conditions. However, “these factors have eroded over time, leaving the current liquidity environment ripe for disruption.”

To summarize, while XRP and others decline in sync with traditional equities, the core catalyst is macro-level liquidity tightening driven by U.S. Treasury actions—not policy speeches or inflation reports.

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