Raoul Pal warns: If the Federal Reserve does not print money again, QE "Liquidity will be in short supply," possibly repeating the 2018 repurchase market financial crisis.

The Federal Reserve and the Treasury are vying for liquidity control before the end of the year, with the market worried about a repeat of the 2018 crisis. Funding pressures are tightening the bank repurchase market. Investors are turning to Crypto Assets as a safe haven, with liquidity being key (Preliminary: The First Commandment of Trading: Discuss Clear Risk Control and Stop Loss for Positions) (Background Supplement: From Leverage Drop to Zero to Stable Profits: A Six-Year Review Experience and Lessons from a Crypto Trader) After more than a month of the U.S. government shutdown, Wall Street is shrouded in the shadow of a potential “funding pipeline” break. Macro observer Raoul Pal warns that if the Federal Reserve does not ease liquidity before the end of the month, the market may see a repeat of the 2018 repurchase crisis. The usage of the Standing Repo Facility (SRF) climbed to $50.35 billion on October 31, highlighting the banking system's thirst for short-term funding. However, the “stigma effect” makes banks reluctant to seek help frequently, leaving the funding gap hidden beneath a calm surface. Pipeline Tightening: Rapid Loss of Reserves The most direct trigger for liquidity tension comes from the Treasury's General Account (TGA)'s wild fluctuations and Quantitative Tightening (QT)'s double whammy. When the government issues debt or spends, the TGA withdraws funds from the banking system within days; QT continues to reduce the Federal Reserve's balance sheet, causing banks' reserves to be squeezed out like toothpaste. The current situation is very similar to the prelude of the overnight repurchase rate surge from 2018 to 2019. The Federal Reserve has urgently convened large banks and the New York Fed to discuss why the SRF has failed to become the “last buyer.” The Liquidity Tug-of-War Between the Treasury and the Federal Reserve Liquidity management is no longer just a monetary policy issue, but involves the political tug-of-war over elections and fiscal deficits. Market participants point out that the Treasury wants funds to reach the real economy through bank lending to strengthen employment and wages, adding points for the election battle before 2026. This route is fundamentally different from the Federal Reserve's traditional Quantitative Easing (QE): the former points to Main Street, while the latter mostly flows to the asset market. BlackRock analysis emphasizes that the TGA's revenue and expenditure can change bank reserves in a short time, making market fluctuations more intense; conversely, although QE is large in scale, it is often criticized for not “reaching the corner coffee shop.” Raoul Pal believes that the Treasury's approach is akin to using “devalued smoke bombs” to cover the huge deficit, while Wall Street indirectly benefits from rising collateral prices. Short-Term Bailout and Long-Term eSLR Breakeven The market generally expects that the Federal Reserve may expand repurchase operations this month or increase SRF dimensions to inject temporary oxygen into banks. However, what can truly lift the constraints is the rumored eSLR reform in the first quarter of 2026. The eSLR's limits on large banks holding government bonds and reserves act like a tightening spell; once relaxed, banks will be able to absorb more government debt and re-leverage their balance sheets. Raoul Pal describes this reform as a “massive liquidity rocket launcher,” believing it will converge with TGA fund releases and QT pressure relief into a “liquidity flood” in 2026. The Role of Bull Bells and Crypto Assets Right now, Crypto Assets are like a safety valve stuffed into a pressure cooker, with trading volume and prices simultaneously showing funding anxiety; however, as long as the liquidity floodgates open in 2026, fixed supply assets like Bitcoin are expected to be the biggest beneficiaries. Raoul Pal describes the future scene: “The distant sound of bull bells is getting louder and closer.” This is driven by $7 trillion in interest payments and debt expansion's next cycle. For investors, high liquidity and high volatility will arrive simultaneously, with the core of the “Everything Code” being to grasp when and by whom liquidity is released. The current situation seems to be just a technical “pipeline adjustment,” but in reality, it intertwines monetary policy, fiscal deficits, and electoral interests. Short-term bailouts may prevent a funding chain break at the end of the year, but if eSLR is ultimately relaxed, the global market is bound to welcome a new wave of asset price inflation. Understanding this power game is key for investors to hold their chips and seize opportunities amid the tumultuous end of 2025. Related Reports: Arthur Hayes predicts: $ZEC will rise to $1000! Will the privacy track win big or is it just crazy speculation? Buying ZEC to dump BTC? The four truths behind the Privacy Coin surge. Leap Therapeutics transforms into a “Privacy Coin ZEC Reserve Company”: has purchased 200,000 Zcash, backed by a $58 million investment from the founder of Gemini. Raoul Pal warns: If the Federal Reserve does not print money QE “liquidity will be short,” or a repeat of the 2018 repurchase market financial crisis. This article was first published on BlockTempo “Blockchain Trends - The Most Influential Blockchain News Media.”