Massive Upside for Bitcoin? Author Adam Livingston on ‘Mother-of-All Liquidity Pivots’

Bitcoin could be set up for a big move, author Adam Livingston said, after The Kobeissi Letter noted that bank cash at the Federal Reserve fell to about $2.93 trillion.

The Kobeissi Letter is an independent macro markets newsletter and widely followed X account run by analyst Adam Kobeissi.

In its Oct. 25 post, the newsletter focused on the number itself, not a price forecast for crypto. It highlighted that the cash banks keep on deposit at the Fed — often called reserve balances — has been sliding toward the low end of recent ranges.

In simple terms, that balance is the banking system’s checking account at the central bank. When it shrinks, dollar liquidity feels tighter and short-term funding can get more sensitive. The Kobeissi Letter’s point was that this reading matters for how the Federal Reserve thinks about its balance sheet and quantitative tightening.

Livingston is a bitcoin-focused author and market commentator who writes about how liquidity cycles spill into crypto. He has published two recent books — “The Bitcoin Age: Your Guide to the Future of Value, Wealth, and Power” and “The Great Harvest: AI, Labor, and the Bitcoin Lifeline” — laying out a framework that connects monetary cycles, scarcity, and digital assets.

He took the same reserve reading and built a thesis around it. In his view, cash levels are approaching what he calls a danger threshold where scarcity starts to bite and policymakers pay closer attention to market functioning.

Livingston ties that squeeze to three forces he says are hitting at once.

In Livingston’s telling, three forces are squeezing cash at once.

First, he says, the U.S. Treasury has been rebuilding its cash balance at the Fed; when the government sells more bills to fill that account, private cash is absorbed and a portion shows up as fewer bank reserves.

Second, he says, the Fed is shrinking its portfolio through quantitative tightening—letting bonds mature without replacement — which also pulls cash out of 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 adjusts.

That sequence is Livingston’s framework; it aligns with how the Fed–Treasury plumbing works in practice but the market implications he draws from it are his view.

From there, Livingston sketches a sequence he says he has seen before.

In his view, when cash feels scarce and funding markets grow jumpy, officials tend to slow balance-sheet runoff or otherwise lean against stress to keep overnight rates orderly. He argues those inflection points — when liquidity stops tightening and starts easing — have often lined up with stronger bitcoin performance.

He points to the 2019 repo market strain, the 2020 emergency policy easing and the 2023 regional-bank turmoil, which he says coincided with large bitcoin advances.

Positioning, he adds, is the second pillar.

Livingston says steady demand from spot bitcoin exchange-traded funds reduces the amount of coin readily available to trade, creating a scarcity backdrop. He contends that if policy signals shift and liquidity improves from a tight starting point, a smaller tradable float can help any upside move travel further.

In plain English, he says, less easily available supply plus friendlier liquidity can make rallies sharper.