Stocks, Bitcoin, and Ethereum are falling? Let’s see it as a buying opportunity.

The data released on September 25 from the United States shows more than just a recovery—it signals an expansion that borders on overheating. Third-quarter GDP growth came in at a staggering 3.8% annualized, one of the highest levels among advanced economies. Employment indicators remain solid, and consumption, the backbone of the U.S. economy, is still strong. Rising wages and a tight labor market continue to support household spending power, making it clear that the U.S. is far from recession.

In other words, the U.S. now finds itself in a “triple alignment” of strong growth, stable employment, and resilient consumption. Concerns about labor markets and growth that had lingered earlier this year proved to be misplaced. Contrary to the market’s fears of an impending recession, the data suggests that the U.S. has entered a phase closer to overheating than contraction. On fundamentals alone, the medium-term outlook for markets still leans toward the upside. But there is one key variable that cannot be ignored: liquidity.

The Reserve Balance Breach: A Liquidity Warning

The Federal Reserve’s reserve balances have recently fallen below $3 trillion. This is not just a technical decline but a critical threshold. Historically, when reserves dipped under this level, financial markets faced recurring stress—from repo market rate spikes to funding squeezes and short-term instability.

This highlights a dual reality: while fundamentals remain strong, short-term liquidity flows are under strain. The Fed cannot leave this unchecked. Financial stability is as central a mandate as monetary policy itself, which is why the Fed will likely have to replenish reserves soon.

Beyond reserves, other liquidity gauges are not in great shape either. The reverse repo facility now holds only about $25 billion, and the Treasury General Account (TGA) still needs an additional $100 billion in funding before the end of September. In short, market liquidity is running dry.

Diverging Short- and Medium-Term Pictures

In the short term, these liquidity pressures make volatility inevitable. Equity markets cannot simply price growth and earnings while ignoring the funding squeeze. The recent correction reflects exactly this: not a collapse in U.S. fundamentals but a temporary liquidity shock weighing on valuations.

This week’s data also undermined another key market expectation: rate cuts. With growth this strong and inflation running hot, the Fed may have to rethink delivering two or three cuts this year. That shift in expectations was another driver behind this week’s turbulence.

Meanwhile, crypto markets faced their own shockwave. On September 26, Bitcoin options totaling 146,593 contracts—worth around $16 billion—were set to expire on Deribit. Combined with stretched valuations after the recent crypto rally, the options expiry and liquidity issues magnified volatility in Bitcoin and Ethereum.

Yet these are short-term distortions. From a medium-term perspective, especially looking into Q4, the story changes. The U.S. remains the world’s strongest growth engine. A 3.8% growth rate is “explosive” for an advanced economy, and it is underpinned by both employment and consumption. Elevated inflation slows the pace of rate cuts, but it also confirms the durability of growth. The Fed will ultimately have to balance inflation risks with financial stability, which makes some form of liquidity injection likely. The implication: short-term instability, medium-term recovery.

Investor’s Lens: Strategic Positioning

For investors, the roadmap is clear. First, do not mistake temporary volatility for a structural downturn. This correction stems from liquidity dynamics, not a collapse in fundamentals. As such, it may well be a preparation phase for the next leg higher.

Second, stock selection is critical. Slower rate cuts mean that high-valuation, leverage-dependent names face headwinds. In contrast, companies with robust cash flows and exposure to structural growth drivers—AI, energy transition, semiconductor supply chains—are positioned to weather turbulence and rebound faster once liquidity pressures ease.

Conclusion

The U.S. economy today is characterized by strong growth, solid employment, and resilient consumption. The term “recession” does not fit this environment. What we are seeing instead is a liquidity squeeze, marked by reserves dipping below $3 trillion, dwindling reverse repo balances, and TGA funding needs—all of which temporarily pressure markets. But these forces are unlikely to derail the structural growth story. On the contrary, they are more likely to trigger liquidity injections that support markets into Q4.

This correction, therefore, is less a crisis than a pause. For investors, the imperative is not to be shaken out by short-term noise but to maintain exposure to medium-term growth narratives, while being selective in positioning. In volatility lies opportunity—and those who recognize the difference between structural weakness and temporary liquidity strain will be best placed to capture the upside when the next cycle unfolds.