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Highlights
- Bitcoin price pump and dump correlate with the US Treasury’s actions with T-bill issuance and RRP.
- BTC’s sideways movement since the Q1 2024 rally reflects a significant slump in the financial market liquidity.
- Bitcoin will be eager to retrace last week’s Japan carry trade losses, triggering the next rally to $100,000 as T-bill issuance increases.
Bitcoin price prediction hinges on liquidity, driven by US Treasury moves. As money flows between the Federal Reserve and the broader financial system, through T-bills and the Reverse Repo Program (RRP), it significantly impacts BTC price trajectory.
Bitcoin Price Prediction: How T-Bills and RRP Affect Liquidity
In his latest issue of “Crypto Trader Digest,” Arthur Hayes, the co-founder of BitMEX exchange, explored all matters liquidity. He dissected the power the US Treasury and the Fed have on financial markets using two key tools: T-bills and the RRP pool.
Think of the RRP as a temporary space holder where money market funds (MMF) “park cash at the Fed overnight” to earn interest. The Fed also runs bank reserves, which allow banks to earn interest.
To raise money to fund the government, the Treasury ‘dangles a carrot’ in front of banks and MMFs by offering a “yield-bearing cash-like instrument.” This is where Treasury bills come into the picture. They have a maturity of less than one year, and appended to them is a slightly higher yield compared to interest earned on Reserve Balances (IORB) and/or RRP.
It is important for crypto traders to pay attention to how money moves between the Federal Reserve’s balance sheet and the larger financial system. As observed in the chart below, “as the RRP (white) fell from its high, Bitcoin (gold) pumped off the lows.”
MMFs are inclined to follow higher yields; therefore, they will move cash from RRP to T-bills as long as they earn more interest. According to Hayes, the Treasury has hinted at issuing “$271 billion of T-bills between now and the end of the calendar year” on top of another $30 billion.
This will imply a strong liquidity injection with a minimum of $301 billion and a maximum of $1.05 billion by the end of the calendar year. Hayes believes this could “create a glorious bull market in all types of risk assets, including crypto, all in time for the election.”
The current Bitcoin price prediction, mirroring Arthur Hayes’s insights, shows that BTC price traded sideways after the Q1 rally because liquidity was pulled from the financial market system. MMFs shunned T-bills, choosing to hold cash in the RRP pool, which left funds stuck on the Fed’s balance sheet.
“From April to July, when T-bills were net withdrawn from the market, RRP rose, and Bitcoin traded sideways, punctuated with a few intense dips,” Hayes explained.
Bitcoin Price Eyes $100,000 Next Stop
Bitcoin price forecast, as per Crypto Trader Digest report, suggests that the additional $301 billion of T-bills expected to flow into financial markets by year-end could quickly drive BTC’s price to $100,000.
Meanwhile, Bitcoin faces growing downside risks, holding below the immediate 200-day Exponential Moving Average Convergence Divergence (MACD) resistance at $59,452. If the downtrend continues, it may validate a death cross pattern and possibly trigger another crash toward $50,000.
Based on the current Bitcoin price prediction, an upcoming buy signal from the Moving Average Convergence Divergence (MACD) could affirm the uptrend, pushing BTC above $60,000. With such a move, the death cross will be avoided, giving bulls leeway to increase buy orders, betting on the uptrend’s continuation first to $70,000 and later toward $100,000.
Frequently Asked Questions (FAQs)
1. Can T-bill issuance drive the next Bitcoin price bull run?
2. Why are MMFs key to liquidity injection?
3. Why has BTC price moved sideways since April?
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