ALPHAVILLE LIQUIDITY ALGORITHM™ November 2, 2026 Good Morning. We begin the first trading week of November with less cash available in the banking system and more pressure in overnight funding markets. Markets look relatively calm on the surface, but the flow of money underneath them is becoming tighter. That matters because sustained rallies need cash that can move into assets. QUICK READ Our Liquidity Score has fallen 0.6 points over the past week to 4.8 out of 10, placing conditions in the defensive Watchlist band. The Treasury’s cash balance has climbed to nearly $1 trillion, while bank reserves have fallen to $2.89 trillion. At the same time, overnight borrowing against Treasury collateral has become more expensive: SOFR stands at 3.94%, four basis points above the Fed’s 3.90% rate paid on bank reserves. A slightly weaker dollar provides some relief, but high bond yields and oil above $100 continue to weigh on markets. Within crypto, rising Tether dominance points to a defensive environment. The overall picture remains one of tight funding and limited support for a broad, sustained rally. ──────────────────── CREATION LAYER — TREASURY CASH BUILDUP The Treasury is pulling cash out of the financial system as it builds its own balance. The Treasury General Account has risen more than 5% in recent days to $999.73 billion. When money moves from private bank accounts into the Treasury’s account at the Fed, it reduces the cash available within the banking system until the government spends it. The Fed’s overnight reverse repo facility is down to $4.38 billion, leaving little of that cash cushion available to absorb further Treasury issuance. With that buffer largely depleted, additional borrowing can put more pressure on bank reserves. Bank reserves have fallen 2.32% to $2.89 trillion, below the $3 trillion level we monitor for signs of tighter conditions. This leaves banks with smaller cash buffers and makes the system more sensitive to further drains. ──────────────────── PLUMBING LAYER — OVERNIGHT CASH IS MORE EXPENSIVE Pressure is showing up in the market where banks, dealers, and other institutions borrow cash against securities such as Treasuries. SOFR, the benchmark for this borrowing, stands at 3.94%. That is four basis points above the Fed’s 3.90% interest rate on reserve balances. This gap signals tighter conditions in secured funding. Institutions are paying more to borrow overnight against high-quality collateral, which can reflect strong demand for cash, limits on dealer balance sheets, or both. Heavy Treasury inventories can add to that pressure because dealers must finance the bonds they hold. The effective federal funds rate remains orderly at 3.88%. Stress is therefore more visible in the repo market than in unsecured overnight lending. The system is still functioning, but financing Treasury collateral has become more expensive. ──────────────────── TRANSMISSION LAYER — SOME DOLLAR RELIEF, BUT YIELDS REMAIN HIGH The Dollar Index has slipped 0.31% to 101.65, easing some pressure on borrowers outside the United States. That helps, but it does not offset the weight of high Treasury yields. The 10-year yield stands at 4.923%, while the 30-year yield remains at 5.290%. Those borrowing costs continue to restrain the movement of money into risk assets. Oil has fallen 3.09% to $100.84 a barrel. The decline is welcome, but energy remains expensive enough to squeeze household and business budgets and complicate the Fed’s inflation outlook. The VIX has declined 0.98% to 19.22, showing that equity-market fear remains contained. That calm does not erase the funding pressure underneath the market. We can have relatively quiet trading while the cash needed to support a stronger rally remains limited. ──────────────────── CRYPTO LIQUIDITY — THE DEFENSIVE POSTURE CONTINUES Tether dominance has risen 0.48% to 6.952%, meaning USDT represents a larger share of the crypto market. This is consistent with defensive conditions, although dominance alone does not tell us how much money has moved into stablecoins. Bitcoin is trading around $77,774, below its 21-day exponential moving average at $80,201 and its 50-day moving average at $81,934. It has yet to reclaim either trend level. Combined with high bond yields and tighter funding conditions, this leaves crypto without strong confirmation that a sustained recovery is underway. ──────────────────── BOTTOM LINE Our Liquidity Score remains in the defensive Watchlist band because cash buffers are shrinking and overnight funding has become more expensive. The Treasury holds nearly $1 trillion, bank reserves sit at $2.89 trillion, and SOFR remains above the Fed’s rate on reserves. Treasury spending would return cash to the banking system. A sustained easing in repo rates would also signal that funding pressure is improving. Until those conditions improve, we stay disciplined with position sizes, honor stop losses, and resist chasing rallies before the funding backdrop supports them.