- BTC could stall at the end of Q1 due to limited US liquidity.
- The US debt ceiling debate could drive extra volatility in January.
Bitcoin (BTC) and the broader cryptocurrency market might mimic the pattern seen in 2024, potentially reaching their peak in March, followed by a prolonged period of decline.
As a crypto investor, I’ve been closely following Arthur Hayes’ insights as Co-Founder of BitMEX and CIO at Maelstrom, a crypto VC firm. Based on his analysis, the upcoming local top in the market could be influenced by two key factors: the Federal Reserve’s ongoing quantitative tightening (QT) and the tax season that kicks off early April.
Hayes pointed out that these two advancements could lead to a decrease in U.S. liquidity, thereby slowing down the growth of risk-on assets such as Bitcoin. In his recent post, he elaborated on this idea.
I anticipate that the market will reach its peak around mid-March. This means that approximately $180 billion in liquidity will be withdrawn from the market between January and March, as part of Quantitative Tightening (QT).
US debt ceiling risk
One point Hayes emphasized was the issue of the U.S. debt limit, which is set at $31.5 trillion for now, unless Congress decides to increase it. If they do, the U.S. Treasury might be able to borrow more money again, potentially reducing market liquidity further. He also mentioned that this adjustment could have implications for the financial market.
When it appears that default and shutdown are imminent, a last-minute agreement is expected to be reached, causing the debt ceiling to be increased. At this point, the Treasury will once again have permission to borrow money, but they’ll also need to replenish the TGA (Treasury General Account). This situation means that there will be less dollars available in circulation.
The tax season in the United States, starting on April 15th, may influence the amount of money circulating, possibly causing turbulence in risk-taking assets, as pointed out by Hayes. Meanwhile, analysts at QCP Capital, a firm specializing in crypto options trading, share this view and predict that the ongoing debate about the US debt ceiling could increase market fluctuations.
In its latest Telegram broadcast, the firm stated,
January may not run smoothly due to potential complications. The U.S. Treasury debt ceiling is expected to be reinstated mid-month, which means the Treasury will need to take ‘extraordinary measures’ to finance government spending. This situation could lead to market fluctuations as talks about the issue become more intense.
The above macro risk could dent January’s bullish outlook for BTC.
For the first time in two weeks, the value of the cryptocurrency surpassed $100,000, signaling a resurgence of hopefulness as we approach Donald Trump’s presidential inauguration on the 20th of January, highlighting the optimism.
In other words, the risk level closely resembled a significant indicator – the Realized Profit/Loss based on the 355-day moving average.
As per an anonymous on-chain expert known as Bitcoindata21, a specific indicator was nearly activating a warning sign for excessive buying, which could potentially lead to a wave of selling due to market euphoria.
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2025-01-07 20:07