"Monetary Shift Unleashed - Cryptocurrencies Anticipate $9 Trillion Impact from Federal Reserve's Asset Reevaluation"
Bitcoin's been stuck in a rut recently, struggling to gain traction after a round of "panic selling" raised concerns about a major bitcoin price crash.
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The bitcoin price dropped from its all-time high of nearly $110,000 per bitcoin, plummeting to around $80,000. This descent occurred despite word leaking that Russia is quietly flirting with bitcoin and cryptocurrencies.
As traders speculate that Donald Trump's White House might be planning a hefty Bitcoin investment, crypto trader Arthur Hayes has predicted that the Federal Reserve could intervene to steady the markets, possibly sparking a bitcoin price surge.
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"When there's financial distress, they always print money. It doesn't matter the political leaning," Hayes, the cofounder of crypto derivatives pioneer BitMex who later launched the Maelstrom investment company, said in a wide-ranging interview with Bitcoin News.
The bitcoin price and the wider crypto market have followed stock markets downward in recent weeks due to U.S. president Donald Trump's on-again, off-again international trade tariffs and the growing risk of recession.
03/19 update: Federal Reserve chair Jerome Powell is stuck between a rock and a hard place, according to Wells Fargo's chief economist, as the Fed is expected to keep rates steady today while grappling with the possibility that Trump's trade war might ignite inflation but also dampen economic growth.
Traders are gossiping that Powell could announce an end to the Fed's balance sheet runoff program, known as quantitative tightening, which could boost the bitcoin price, crypto, and stock markets.
"Our rates strategists expect the statement to indicate that the Fed is pausing quantitative tightening until the debt ceiling is resolved, as suggested in the January meeting minutes," Bank of America analysts wrote in a note seen by Coindesk. "They don't expect to restart after the debt ceiling is addressed, but the announcement won't be made until later this year."
The Fed will announce its interest rate decision at 2pm ET, followed by Powell's 2:30pm ET press conference.
"Late last year, Fed chair Powell hinted that the end of [quantitative tightening] was coming in 2025. If he mentions it in [today's statement or press conference (I imagine someone will ask him), that would signify that we're in a new monetary regime, and that the Fed stands ready to resume additional debt purchases should [quantitative easing] become necessary again," Noelle Acheson, editor of the Crypto Is Macro Now newsletter, wrote in an emailed note.
"While renewed [quantitative easing] is unlikely any time soon, the additional liquidity from a large buyer (the Fed) returning to the market to replace maturing holdings would be good news," Acheson wrote, adding that the Treasury market is facing $9 trillion in debt maturity this year that quantitative tightening could unsettle.
"When the dam bursts, it's go-time," Hayes said, referring to the return of liquidity to the market, and predicting "they're going to reflate and print more money than anyone's ever printed before."
The last bitcoin price boom, which saw the bitcoin price climb to around $70,000 in late 2021, was sparked by massive Covid-era government stimulus spending and money-printing.
"We are in the midst of a low point in liquidity fiat money generation," Hayes said.
Hayes has predicted that the bitcoin price will reach $250,000 by the end of the year as the Fed is forced to loosen its purse strings and support the economy and asset prices.
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Enrichment Data:
Speculation about potential Federal Reserve intervention in the Bitcoin market and its impact on Bitcoin pricing is intertwined with broader economic policies and regulatory shifts under the Trump administration. The following crucial points are noteworthy:
Speculation on Federal Reserve Intervention
- Policy Shifts by Trump Administration: The Trump administration has enacted deregulations in financial oversight, which might indirectly influence the Federal Reserve's role in managing economic policies[2]. This could, in turn, affect the crypto market by altering regulatory environments.
- Strategic Bitcoin Reserve: The Trump administration's executive order to establish a Strategic Bitcoin Reserve aims to retain Bitcoin seized in criminal cases instead of auctioning them off[3][4]. This policy does not involve buying Bitcoin with taxpayer funds but keeps seized assets as national treasures. Reducing circulating supply could potentially boost Bitcoin's price[3].
Impact on Bitcoin Price
- Price Speculation: Experts like Arthur Hayes have speculated that Bitcoin could reach $250,000 by the end of 2025, with Federal Reserve actions and broader economic policies playing key roles[1].
- Market Dynamics: The formation of a Bitcoin reserve could reduce selling pressure by removing auctioned-off Bitcoin from circulation. This decrease in supply might support higher prices[3].
- Regulatory Impact: A pro-crypto regulatory environment, as signaled by the Trump administration, could bolster investor confidence and lead to increased demand for Bitcoin[4].
However, these predictions and implications are speculative, and actual outcomes depend on a multitude of market and regulatory factors.
- Jerome Powell, the Federal Reserve chair, may announce an end to the Fed's balance sheet runoff program, known as quantitative tightening, which could potentially boost the bitcoin price, crypto, and stock markets.
- Arthur Hayes, the cofounder of crypto derivatives pioneer BitMex, believes that the Fed is likely to loosen its purse strings and support the economy and asset prices, which could lead to a surge in the bitcoin price.
- Experts suggest that if the Federal Reserve resumes quantitative easing, it would inject additional liquidity into the market, potentially benefiting the bitcoin price and the wider crypto market.
