Bitcoin has seen small profits in recent days, but it has yet to break above its current trading range, despite favorable macroeconomic conditions. At the time of writing this article, Bitcoin trades at $27,100, having recorded a 2% profit in the past week. Other cryptocurrencies in the top 10 by market cap have had similar performances.
Fed’s Dilemma as an Opportunity for Bitcoin
The BitMEX founder, Arthur Hayes, stated in an essay that macroeconomic uncertainty and the US banking crisis failed to push Bitcoin’s price up. Hayes expected Bitcoin to experience aggressive upward price action in 2023, which deviated from his predictions, despite favorable winds. Nevertheless, Hayes claimed that Bitcoin could still reach new highs and might experience “the real bull market” later this year. Until then, and probably until Q3 to Q4 this year, Bitcoin will likely continue to trade sideways.
Dollar (USD) liquidity on financial markets, technology, and adoption are the key drivers of Bitcoin’s upward surge. Dollar liquidity is anticipated to have more significant influence in the coming months as the Federal Reserve (Fed) faces a predicament.
Since late 2021, the Fed has been tightening economic conditions, leading to a decrease in USD liquidity that negatively affected equities and risk-on assets, including Bitcoin. The Fed’s objective was to slow down the highest level of inflation in the last four decades, which it has achieved. However, the Fed’s actions could backfire. Inflation is decreasing, but banks and other global economic sectors are suffering from increasing rates. Thus the Fed has two options – to cut or continue raising rates.
New Highs for BTC, But Short-Term Uncertainty Persists
If the Fed raises interest rates, the banking crisis in the US could worsen, leading to the mass adoption of independent forms of money, including Bitcoin, gold, and other commodities. If the Fed cuts rates, the US economy could grow, and the financial market could stand on the same hill as it was in 2021 when Bitcoin hit an all-time high of $69,000. Wealthy individuals with enough reserve could invest in risky assets, causing BTC’s price to surge again.
In conclusion, Bitcoin will likely hold firm as money slowly trickles into the global risk asset markets. A strong base of support will form, and Bitcoin’s price will boom when the printer goes brrr and USD liquidity increases. Arthur Hayes predicts that Bitcoin will hold firm and will not retest $20,000 or come anywhere close.
Cover image from Unsplash, Chart from Tradingview
