Bitcoin has observed the high jaggedness of the market horizon characterized by $76,000 and $84,472. All eyes are on the monetary policy announcements that will hit the ripples on the crypto space. The rats are already leaving the ship with growing speculation of possible termination of what they call 'quantitative tightening' (QT) making BTC's future uncertain yet optimistic.
Federal Reserve And Its Future Involvement With Bitcoin
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| Involvement With Bitcoin |
The general expectation from the Federal Open Market Committee (FOMC) at its next meeting will be to keep rates somewhere in the range of 4.25% to 4.50%. Currently the talk has swayed towards the QT program, the asset selling program where the Fed simply allows its balance sheet to shrink by not reinvesting liabilities in maturing bonds. Analysts at Bank of America believe that, well ahead of this expected liquidity windfall, the Fed will announce an end of QT.
The recognition that there has been an increase in liquidity in the market is usually accompanied by a commensurate rise in the price of bitcoin on that occasion. From March 2020, after the Fed had announced Quantitative Easing, it gained almost 30% within a week. If indeed the Fed brings quantitative tightening to an end, it might reignite the risk-on sentiment for bitcoin as well as other bullish instruments.
Sentiment Corroborated by Date-Price Predictions
Investors demonstrate mixed feelings towards the market, with optimistic hope of some monetary easing and beleaguered expectations regarding the economy. Analysts at 10x Research declare that if worries of inflation abate and actual monetary easing are taken by the Fed, then it would rather take Bitcoin $90,000 nearer in the near future. A dovish stance taken by the Fed may trigger an intermediate rally that may undo some recent downsides.
Stagflation-in stagnant growth and inflation, the most dramatic phenomenon in the world, at any point in time, will weigh heavily on Bitcoin's upside potential and appeal. Such liquidity injections may inflate asset values in the short term. The long run would largely depend on external economic factors in determining whether this rally by Bitcoin could continue.
Conclusion
So, in the immediate near future, we have Bitcoin hinging on the Fed's next move. If QT closes as currently believed, the increase in liquidity will definitely help in taking the price of Bitcoin sky-high. On the contrary, there are macroeconomic uncertainties that are a risk to the market. Such investors must keep track of some key indicators such as inflation direction and the Fed's choice of words in assessing the outcome for Bitcoin.
The market points to a next step from the Fed in which Bitcoin is at a unique moment in time, one ripe of immediate but potentially fleeting gains or losses depending on which macroeconomic way the economy blows.
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