Huge upside for bitcoin? Adam Livingston Author of ‘Mother-of-All Liquidity Pivots’

Bitcoin could be set up for a big transition, author Adam Livingston saidafter the Kobeissi letter mentioned That stash of cash at the Federal Reserve fell to nearly $2.93 trillion.

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

In its October 25 post, the newsletter focused on the number itself, not a price forecast for the crypto. It highlighted that the cash banks keep on deposit with the Fed – often called reserve balances – has slipped towards the low end of recent ranges.

In simple terms, that balance is the banking system’s checking account with the central bank. When it shrinks, dollar liquidity feels lighter and short-term funds can become more sensitive. The point of Kobeissi’s letter is that this matters reading 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 emerge in crypto. He 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 links financial cycles, scarcity, and digital assets.

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

Those tied to Livingston’s squeeze on the three forces he says are whipped right away.

According to Livingston, three forces are squeezing cash at the same time.

First, he said, the US Treasury rebuilt the cash balance at the Fed; When the government sells more bills to fill that account, private cash is absorbed and a portion shows fewer bank reserves.

Second, he says, the Fed is shrinking its portfolio through quantitative tightening — letting bonds have enough of a substitute — which is also taking cash out of the system.

Third, he says, other Fed liabilities such as money in circulation grow over time, taking up balance-sheet space and leaving less room for bank cash other than policy adjustments.

That sequence is the outline of Livingston; This 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’s seen before.

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

He points to the 2019 Repo Market Strain, the 2020 Emergency Policy Easing and the 2023 Regional-Bank Turmoil, which he says coincides with Bitcoin’s big advance.

Positioning, he added, is the second pillar.

Livingston said the steady demand from Bitcoin exchange-traded funds is reducing the amount of coin readily available for trade, creating a backlog. He contends that if bullish signals change and liquidity improves from a tight starting point, a smaller tradable float will help any upside move travel further.

In plain English, he says, less readily available supply combined with favorable liquidity could make for a sharper rally.