Analysts warn that Bitcoin may face a short-term slowdown due to tightening global liquidity driven by a stronger U.S. dollar following Donald Trump’s re-election, which could challenge potential price gains.
According to a research note from Matrixport, Asia’s blockchain analysis hub, tightening global liquidity could affect Bitcoin’s performance. Crypto analyst Markus Thielen noted that historical trends indicate Bitcoin’s price usually reacts approximately 13 weeks after changes in global liquidity. As liquidity conditions tighten, Bitcoin may experience a phase of integration, especially with weakening dollar-denominated liquidity.
Despite the anticipated short-term decline, Thielen remains optimistic about the overall outlook for Bitcoin and other risk assets. He pointed out that while traders may take a more cautious approach during this time, the long-term prospects for Bitcoin are still strong. He also emphasized that the dip is likely temporary, indicating that the fundamentals supporting Bitcoin’s growth remain intact.
Yahoo Finance data indicates a warning following a significant decline in inflows into spot Bitcoin exchange-traded funds on January 7, coinciding with a 5% drop in Bitcoin’s value. The dip was fueled by growing expectations of a more hawkish stance from the Federal Reserve. While Bitcoin may face some challenges soon, analysts maintain a positive outlook for its future as market conditions stabilize.
Arthur Hayes, the co-founder of BitMEX, predicted that Bitcoin would experience a rally that would peak in late March. In an essay published on January 7, Hayes attributed this potential surge to the Federal Reserve’s quantitative tightening (QT) and liquidity measures. The Federal Reserve plans to withdraw $180 billion through QT from January to March. However, adjustments to the Reverse Repo Program rate could lead to an injection of $237 billion, resulting in a net liquidity increase of $57 billion. Hayes suggests that these policies may positively impact risk assets like Bitcoin in early 2025.
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