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 a market strategist to predict the end of quantitative tightening (QT) to avoid a “catastrophic debt crisis”.
Analyst: Fed will have “no choice” with rate cuts
The US Federal Reserve continues to drain liquidity from the financial system to fight inflation, reversing the years of money printing in the COVID-19 era.
While the rise in interest rates looks set to continue declining in scope, some now believe that the Fed will soon have only one option – to halt the process altogether.
“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on the 27th of January.
“Higher for longer is a fantasy not rooted in math reality.”
Henrich uploaded a chart showing the interest payments on current US government spending, currently around $1 trillion a year.
A dizzying amount, interest comes from the debt of the US government which is more than $31 trillion, and the Fed printed a trillion dollars since March 2020. Since then, interest payments have increased by 42%, Henrich said.
That phenomenon is not found anywhere else in crypto circles. The popular Twitter account Wall Street Silver compares interest payments as a share of US tax revenue.
“The US will pay $853 Billion in Interest on $31 Trillion in Debt in 2022; More than the Defense Budget in 2023. If the Fed keeps interest rates at this level (or higher) we will be in the $1.2 trillion to $1.5 trillion interest paid in debt, “that written.
“The US government collects approximately $4.9 trillion in taxes.”
Such a scenario could be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity have been associated with an increased appetite for risk assets across the mainstream investment world.
The Fed unwinding the policy was accompanied by Bitcoin’s 2022 bear market, and the “pivot” in interest rate hikes is therefore seen by many as the first sign of “good” times to return.
Crypto pain before pleasure?
Not everyone, however, agrees that the impact on risk assets, including crypto, will be positive ahead of time.
Related: Bitcoin ‘so bullish’ at $23K as analysts reveal new BTC price metrics
As Cointelegraph reported, ex-BitMEX CEO Arthur Hayes believes that chaos will come first, tanking Bitcoin and altcoins to new lows before any sort of long-term renaissance kicks in.
If the Fed faces a complete lack of options to avoid a meltdown, Hayes believes that the damage will have been done before QT gives way to quantitative easing.
“This scenario is less than ideal because it will mean that anyone who buys risky assets now will be in store for massive drawdowns in performance. 2023 could be as bad as 2022 until the Fed pivots,” he wrote in a blog post this month.
The views, thoughts and opinions expressed here are the authors’ own and do not necessarily reflect or represent the views and opinions of Cointelegraph.
