Commentators believe that Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again.
The latest analysis of US macroeconomic data has led one market strategist to predict the end of quantitative tightening (QT) to avoid a “catastrophic debt crisis.”
Analyst: Fed will have no ‘choice’ with rate cuts
The US Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of money printing from the COVID-19 era.
While it looks like interest rate hikes will continue to abate, some now believe that the Federal Reserve will soon have only one option: stop the process entirely.
“Why will the Fed have no choice but to cut or risk a catastrophic debt crisis?” Sven Henrich, founder of Northman Trader, summarized it’s january 27
“Higher for longer is a fantasy that has no roots in mathematical reality.”
Henrich uploaded a chart showing interest payments on current US government spending, now running at $1 trillion a year.
A dizzying number, the interest comes as US government debt tops $31 trillion, with the Fed printing trillions of dollars since March 2020. Since then, interest payments have increased by 42%, Henry pointed out.
The phenomenon has not gone unnoticed elsewhere in crypto circles. The popular Wall Street Silver Twitter account compared interest payments as a share of US tax revenue.
“The United States paid $853 billion in interest on $31 trillion of debt in 2022; More than the defense budget in 2023. If the Fed keeps rates at these levels (or higher), we’ll be at $1.2 trillion to $1.5 trillion in interest paid on debt.” wrote.
“The US government collects about $4.9 trillion in taxes.”
Such a scenario could be music to the ears of those with significant exposure to Bitcoin. Periods of “easy” liquidity have been matched by increased appetite for risky assets in the world of conventional investing.
The dismantling of that policy by the Federal Reserve accompanied the 2022 Bitcoin bear market, and thus a “turnaround” in interest rate hikes is seen by many as the first sign of the return of the “good guys.” time.
Cryptopain before pleasure?
However, not everyone agrees that the impact on risky assets, including crypto, will be entirely positive before then.
Related: Bitcoin ‘so bullish’ at $23K as analyst reveals new BTC price metrics
As Cointelegraph reported, former BitMEX CEO Arthur Hayes believes that chaos will come first, sinking Bitcoin and altcoins to new lows before any kind of long-term renaissance begins.
If the Fed faces a complete lack of options to avoid a collapse, Hayes believes the damage will already be done before QT gives way to QE.
“This scenario is less than ideal because it would mean that everyone who is buying risky assets would now be in for massive reductions in yield. 2023 could be as bad as 2022 until the Fed changes direction,” he said. wrote in a blog post this month.
The views, thoughts, and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
