LIQUIDITY KNOWLEDGE BASE
Bank Reserves
Bank cash held at the Federal Reserve.
Definition
Bank reserves are balances that depository institutions hold at Federal Reserve Banks.
Liquidity Rule
Rising reserves are generally supportive. Falling reserves are neutral while abundant, but a fast fall can become a drain or transmission blockage.
Crypto Impact
Crypto tends to respond better when reserves are stable or rising and funding markets are calm.
Bullish Setup
Reserves rising alongside calm funding spreads.
Bearish Setup
Fast reserve drain plus repo or SOFR pressure.
Common Misunderstanding
A small reserve decline is not automatically bearish when the system remains abundant.
Related
Reserves up = add; slow down = watch/neutral; fast down = drain.