Key Points
- Bitcoin and the crypto market could follow a 2024 trend and top out in March due to the Fed’s ongoing quantitative tightening (QT) and tax season.
- The US debt ceiling debate and tax season could potentially stall risk-on assets like Bitcoin.
Bitcoin [BTC] and the entire crypto market could possibly follow a trend projected for 2024, peaking in March before an extended correction phase. This prediction comes from Arthur Hayes, Co-Founder of BitMEX and CIO at crypto VC Maelstrom.
Fed’s QT and Tax Season Impact
Hayes suggests that the local peak in March will be influenced by the Fed’s ongoing quantitative tightening (QT) and the early April tax season. According to him, these developments would negatively impact US liquidity, affecting assets like BTC. Hayes stated, “My prediction is that the market peaks in mid to late March, so this equates to a removal of $180 billion worth of liquidity due to QT from January to March.”
US Debt Ceiling Risk
Hayes also highlighted the risk associated with the US debt ceiling, currently at $31.5 trillion. If Congress decides to increase it, the US Treasury could borrow again, potentially draining additional market liquidity. He added, “Once default and shutdown are imminent, a last-minute deal will be reached, and the debt ceiling will be raised. At that point, the Treasury will be free to borrow on a net basis again and must refill the TGA. This will be dollar liquidity negative.”
The US tax season, starting from the 15th of April, could further affect the money supply, potentially stalling risk-on assets. Similar sentiments were echoed by analysts at crypto options trading desk, QCP Capital, who warned that the US debt ceiling debate could drive market volatility.
The firm stated, “It won’t be smooth sailing into January, as structural risks loom. The U.S. Treasury debt ceiling reinstatement is projected to be reinstated mid-month, requiring the Treasury to adopt “extraordinary measures” to fund government expenditures. This could trigger market volatility as discussions around the issue intensify.”
These macro risks could impact January’s bullish outlook for BTC. The cryptocurrency recently surpassed $100K for the first time in two weeks, indicating renewed optimism ahead of Donald Trump’s presidential inauguration on the 20th of January.
Despite this, the risk is almost in line with a key top signal– Realized Profit/Loss using the 355-day moving average. According to a pseudonymous on-chain analyst, Bitcoindata21, this metric was close to triggering a euphoria sell signal.
