Commentators believe that Bitcoin (BTC) bulls don’t have to wait long for the US to start printing money again.
A recent analysis of US macroeconomic data has led one market strategist to predict that quantitative tightening (QT) will end to avoid a “catastrophic debt crisis”.
Analyst: The Fed “will have no choice” to cut interest rates
The US Federal Reserve continues to drain liquidity from the financial system to fight inflation, bringing back the money printing of the COVID-19 era.
While the scope for rate hikes looks set to continue to narrow, some now believe the Fed will soon have only one option – to stop the process altogether.
Sven Henrich, founder of NorthmanTrader, “Why the Fed will have no choice but to taper or risk a catastrophic debt crisis” summarized where January 27.
“Fantasy that is not grounded in mathematical reality is higher for longer.”
Henrich uploaded a graph showing the interest payments on the US government’s current spending, which now tops $1 trillion a year.
The staggering number comes from the US government debt, which is over $31 trillion in interest, and the Fed has been printing trillions of dollars since March 2020. Since then, interest payments have increased 42%, Henrich noted.
This phenomenon has not gone unnoticed in crypto circles. A popular Twitter account compared Wall Street Silver’s interest payments as a fraction of US tax revenue.
“The US paid $853 billion in interest on $31 trillion in debt in 2022; More than the Defense Budget in 2023. If the Fed keeps rates at these levels (or higher), we’ll be paying $1.2 trillion to $1.5 trillion in interest on the debt.” he wrote.
“The US government collects about $4.9 trillion in taxes.”
Such a scenario would be music to the ears of those with significant exposure to Bitcoin. Periods of “easy” liquidity correspond with increased appetite for risk assets in the mainstream investment world.
The Fed’s withdrawal from this policy accompanied Bitcoin’s 2022 bear market, and thus many see the “turn” in interest rate hikes as the first sign that the “good” times are back.
Crypto pain before pleasure?
However, not everyone agrees that the impact on risk assets, including cryptocurrency, will be entirely positive before then.
Related: Bitcoin ‘very bullish’ at $23K as analyst reveals new BTC price metrics
As reported by Cointelegraph, former BitMEX CEO Arthur Hayes primarily believes in the coming of chaossending Bitcoin and altcoins to new lows before any long-term renaissance begins.
If the Fed is faced with a complete lack of options to prevent a collapse, Hayes believes the damage has already been done before QT can indulge in quantitative easing.
“This scenario is less than ideal, as it means that anyone who buys risky assets now will see big declines in performance. 2023 could be as bad as 2022 before the Fed turns around.” he wrote in a blog post this month.
The views, opinions and opinions expressed herein are solely those of the authors and do not reflect or represent the views and opinions of Cointelegraph.
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