Arthur Hayes recently shared a sophisticated overview of the current state of the financial market that not everyone understood correctly. Here is what he actually meant.
The statement “As expected, AGR continues to decline, which is liq +ve“means that the Treasury General Account (TGA) continues to decline, as expected. This is considered a positive development for liquidity, as the decline in the TGA could potentially increase the supply of cash and other liquid assets in the economy.
Arthur Hayes (@CryptoHayes) February 17, 2023
The expression “liq +ve“is an abbreviation of “positive liquidity“, meaning that the decline in the TGA is considered a positive development for the liquidity of the financial system.
The statement “This risk rally has room to run unless the Fed wants to change its QT pace“suggests that the TGA decline may contribute to a “risk rally” in the financial markets, and that this rally could continue unless the Federal Reserve decides to change its pace of “QT“or quantitative tightening. Quantitative tightening refers to the process of reducing the size of the Federal Reserve’s balance sheet by selling assets such as Treasury securities.
The statement implies that if the Federal Reserve were to slow or reverse its quantitative tightening program, it could impact the risk rally and financial markets in general. Indeed, the pace of QT may impact the supply of Treasury securities in the market, which in turn may affect interest rates, liquidity and other financial market conditions.
With respect to the crypto-currency market, any increase in risk tolerance among investors will lead to positive price dynamics on digital assets.