Commentators believe Bitcoin (BTC) bulls won’t have to wait long for the US to start printing money again.
The latest analysis of US macroeconomic data has led one market strategist to predict the end of quantitative tightening (QT) to avert a “devastating debt crisis.”
Analyst: Fed will have ‘no choice’ to cut rates
The US Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of money printing during the COVID-19 era.
While the range of rate hikes appears to continue to shrink, some now believe the Fed has only one option. In other words, stop the process completely.
NorthmanTrader founder Sven Henrich wrap up January 27th.
“Longer and higher is an illusion that is not grounded in mathematical reality.”
Henrich uploaded a chart showing interest payments on current US government spending. We are now heading towards $1 trillion a year.
A dizzying number, this interest rate is attributed to over $31 trillion in US government debt, with the Fed issuing trillions of dollars since March 2020.
This phenomenon has not gone unnoticed elsewhere in the crypto world. A popular Twitter account, Wall Street Silver, compared interest payments to a portion of US tax revenue.
“The United States paid $853 billion in interest on $31 trillion of debt in 2022. It will exceed the defense budget in 2023. If the Fed keeps rates at these levels (or above), Interest paid on debt will be $1.2 trillion to $1.5 trillion. I have written.
“The U.S. government collects about $4.9 trillion in taxes.”
Scenarios like this may be music to the ears for those with significant exposure to Bitcoin. The period of “easy” liquidity corresponds to the increased appetite for risky assets across the mainstream investment community.
The unwinding of that policy by the Federal Reserve will accompany Bitcoin’s 2022 bear market, and the rate hike “pivot” is seen by many as the first sign that the “good” times are back. I’m here.
Crypt pain before pleasure?
However, not everyone agrees that the impact on risk assets, including cryptocurrencies, will be entirely positive before then.
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As reported by Cointelegraph, former BitMEX CEO Arthur Hayes believes the turmoil will come first, driving Bitcoin and altcoins to new lows and beginning a long-term renaissance.
If the Fed faces a complete lack of options to avoid a meltdown, Hayes believes the damage has already been done before QT gives way to quantitative easing.
“This scenario is less than ideal because everyone buying risky assets now is expecting a significant underperformance. Until we turn around, the year could be as bad as 2022.” I have written In this month’s blog post.
The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views or opinions of Cointelegraph.
