Commentators believe that Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again.
The latest analysis of US macroeconomic data has led one market strategist to forecast an end to quantitative tightening (QT) to avoid a “catastrophic debt crisis.”
Analyst: Fed ‘will have no choice’ with rate cuts
The US Federal Reserve continues to withdraw liquidity from the financial system to fight inflation, reversing years of money printing from the COVID-19 era.
Although it appears that interest rate hikes will continue to ease, some believe that the Federal Reserve will soon have only one option: stop the process altogether.
“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis”, summarized on January 27 Sven Henrich, founder of NorthmanTrader.
“Higher for longer is a fantasy that is not grounded in mathematical reality.”
Henrich posted a graph showing interest payments on current US government spending, which is now spiraling toward $1 trillion a year.
A dizzying number, the interest comes as US public debt exceeds $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have risen 42%, Henrich noted.
The phenomenon has not gone unnoticed in other cryptocurrency circles. The popular Twitter account, Wall Street Silver, compared interest payments as a share of US tax revenue.
“The US paid USD 853,000 million in interest for a debt of USD 31 trillion in 2022; more than the Defense budget in 2023. If the Fed maintains the rates at these levels (or higher) we will be between 1.2 and 1.5 trillion dollars in interest paid on the debt” wrote.
“The US government collects about $4.9 trillion in taxes.”
This scenario could be music to the ears of those with significant exposure to Bitcoin. Periods of “easy” liquidity have been matched by increased appetite for risky assets in the investment world.
The easing of that policy by the Federal Reserve accompanied the 2022 bear market for Bitcoin, and a “turn around” in interest rate hikes is seen by many as the first sign of the return of the “good” times.
Pain for cryptocurrency investors before pleasure?
However, not everyone agrees that the impact on risky assets, including cryptocurrencies, will be entirely positive before then.
Related: Bitcoin ‘so bullish’ at $23K as analyst reveals new BTC price metrics
As we previously reported, former BitMEX CEO Arthur Hayes believes that chaos will come first, plunging Bitcoin and altcoins to new lows before any kind of long-term renaissance ensues.
If the Fed is faced with a complete lack of options to avoid a collapse, Hayes believes the damage will already be done before QT gives way to QE.
“This scenario is less than ideal because it would mean that everyone buying risk assets now would be in for massive declines in profitability. 2023 could be just as bad as 2022 until the Fed changes course,” he wrote in a blog post. this month.
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