Signposts

The author argues that a decline in the Fed's reverse repo (RRP) balance, combined with the expiry of the Bank Term Funding Program (BTFP) on March 12th, will drain dollar liquidity and trigger a crypto washout in early March, after which the Fed is expected to restart liquidity support. The author states a base case that the RRP balance hits $200 billion in early March, with the BTFP cancelled on the 12th, reinstated by the 20th, and a Fed rate cut. The author plans to buy Bitcoin put options expiring June 28th with a strike 20% to 25% out of the money, expecting a 20% to 30% correction.