Summary Over the next four trading days, approximately $137 billion in Treasury settlements will drain liquidity from markets. Settlement days historically pressure risk assets, with equities and Bitcoin showing notable underperformance versus non-settlement days. Bitcoin is particularly vulnerable, averaging a 1.96% decline on settlement days compared to a modest gain on non-settlement days. Liquidity pressures are expected to persist through April tax season, with potential relief once Treasury tax receipts arrive. The next big liquidity drain starts today, with four consecutive trading days of treasury settlement, which will equal around $137 billion being sucked out of the marketplace to meet the Treasury's needs for government funding. On Thursday, February 26, $22 billion is due to settle, followed by another $37 billion on Friday, approximately $59 billion on Monday, March 2, and about $19 billion on March 3. That is a great deal of cash that will need to be raised to meet the needs of these Treasury settlements. As we have discussed in the past , on days when Treasury settlements hit the market, equities and risk assets in general struggle and tend to do well on non-settlement or pay-down days. If that pattern remains consistent, then it is likely a rough road ahead; there are clearly no certainties. On Tuesday, February 24, it was a settlement day, and the S&P 500 (SP500) rose by around 80 bps, which the average seems to suggest was an outlier, but still it happened. The Pattern Is Not Subtle Since October 28, there have been 30 settlement dates on which the U.S. Treasury has drained net new cash; of those days, only 11 have been higher, while the other 19 have been lower. On average, days that were up rose by 42 bps, and days that were down fell by 87 bps. Over that same time, there have been 52 days of non-settlement or net pay-downs, and 35 days higher, with an average gain of 55 bps and an average decline of 36 bps. Overall, the average return on a settlement day is a decline of about 40 bps, while on a non-settlement or net pay-down day, it is a gain of 25 bps. TradingView Bitcoin Shows It More Clearly The returns are even more stark when looking at Bitcoin (BTC-USD), which has been up only 7 of 30 settlement days, has an average drawdown of 2.84%, and has risen by around 92 bps. Meanwhile, across the 91 non-settlements, which also include weekends, Bitcoin has risen 45 times, with an average gain of 1.85% and a decline of 1.55%. The average return on a settlement day is a decline of 1.96% and a gain of 13 bps on a non-settlement day (net pay-down day). TradingView But what is clear is that there is a pattern, and what is more interesting is that it does not exist in fixed-income proxies like the iShares 20+ Year Treasury Bond ETF ( TLT ). In fact, the average daily return on both settlement and non-settlement days is -3 bps and -2 bps, respectively. Additionally, the days up and days down on both are nearly split evenly. It further strengthens the case that liquidity is being withdrawn from risk assets to meet Treasury funding needs. TradingView For now, crypto appears to be taking the biggest hit, with equities right behind it. This process of draining liquidity will likely continue right through the April tax day, and then we should see an easing of the cycle since the Treasury will have tax receipts to work with, until the process probably starts again over the summer months.