Trump's Budget Bill Passes House, Bitcoin Faces $500 Billion Liquidity Drain

On July 3, President Trump’s budget bill, dubbed the “Big Beautiful Bill,” passed the House with a narrow margin of 218-214. The bill is now en route to the White House for the President’s signature. While political debates focus on budget cuts and tax reforms, the crypto market is preparing for potential aftershocks, particularly for Bitcoin.

Despite support from pro-crypto lawmakers like Senator Cynthia Lummis, the final bill did not include provisions for tax relief for miners, stakers, and holders. These amendments were reportedly dropped due to time constraints during the reconciliation process. However, a more significant concern is the potential liquidity drain triggered by Treasury actions once the bill becomes law.

The US Treasury is set to refill its Treasury General Account (TGA) with up to $500 billion, an action that Arthur Hayes, co-founder of BitMEX, warns could drain liquidity from financial markets. Hayes predicts that if the TGA refill is dollar liquidity negative, Bitcoin could drop to $90,000 to $95,000. If the impact is minimal, Bitcoin may fluctuate in the $100,000 range without a decisive break above $112,000.

Bitcoin is currently trading around $109,000 after recovering from recent dips. However, the upcoming TGA refill and macroeconomic caution have analysts bracing for a short-term retracement. Hayes suggests that this liquidity event could push Bitcoin down to $90,000-$95,000, a zone many are now looking to buy into. This view is shared by other market analysts tracking the bill’s fiscal impact, who expect volatile bond markets in July that could spill over into crypto as funds temporarily rotate out of high-risk assets.

Hayes remains long-term bullish, believing that if markets absorb the Treasury issuance without dislocation, Bitcoin will stay in the low $100Ks before moving to new highs. He also points to another bullish factor: stablecoin-led liquidity via commercial banks, which he calls the “Stablecoin Liquidity Bazooka.” Hayes predicts that if the Fed stays neutral and the stablecoin flow continues, the next leg of the Bitcoin bull run is on, with $112,000 being just the beginning.

One of the biggest letdowns for crypto enthusiasts was the lack of tax reform for digital asset holders in the Big Beautiful Bill. Several amendments, sponsored by Senators like Cynthia Lummis, sought to clarify staking income taxation and capital gains exemptions for microtransactions. None made it into the final bill. This means more regulatory friction and a missed opportunity to update the tax code for the digital age. The IRS’s stance on staking income remains unclear, and advocates warn it will hinder blockchain innovation in the US.

The dynamic of the Big Beautiful Bill is complex. On one hand, the bill’s fiscal expansion and Treasury liquidity drain will likely suppress Bitcoin’s momentum. On the other hand, its macro impact combined with growing institutional demand and decentralized liquidity will reinforce Bitcoin’s long-term thesis. Analysts are watching for near-term weakness as the TGA rebuild kicks in. However, history shows that Bitcoin often bounces back stronger after macro-driven pullbacks, especially when demand is strong.