Commentators believe that Bitcoin (BTC) bulls don’t need to wait long for the United States to start printing money again.
Analysis of the latest US macroeconomic data has led one market strategist to predict the end of quantitative tightening (QT) to avoid a “catastrophic debt crisis.”
Analysts: Fed will be “no choice” with rate cuts
The US Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing the years of the COVID-19 era of money printing.
While interest rate hikes appear to be continuing to decrease in scope, some now believe that the Fed will have only one option – to end the process.
“Why the Fed will have no choice but to cut or risk the debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized it’s Jan. 27.
“Longer is a fantasy not based on mathematical reality.”
Henrich uploaded a chart showing interest payments on current US government spending, currently running at $1 trillion per year.
A surprising number, the interest on the US government debt is more than $31 trillion, with the Fed printing a trillion dollars since March 2020. Since then, interest payments have increased by 42%, Henrich said.
The phenomenon is not seen elsewhere in crypto circles. The popular Twitter account Wall Street Silver compares interest payments as part of US tax revenue.
“US Pays $853 Billion in Interest on $31 Trillion in Debt in 2022; More than the Defense Budget in 2023. If the Fed keeps rates at that level (or higher) we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt, “that write.
“US government collects $4.9 trillion in taxes.”
That scenario may be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity coincide with increased appetite for risk assets across the major investment world.
The Fed’s unwinding of the policy that accompanied the Bitcoin 2022 bear market, and the “pivot” in the increase in interest rates is thus seen by many as the first sign of “good” times to return.
Crypto pain before pleasure?
However, not everyone agrees that the impact on risk assets, including crypto, will be positive beforehand.
Related: Bitcoin ‘turns bullish’ on $23K as analysts reveal new BTC price metrics
As Cointelegraph reported, Ex-BitMEX CEO Arthur Hayes believes chaos will come first, tanking Bitcoin and altcoins to new lows before any sort of long-term renaissance kicks in.
If the Fed is faced with a complete lack of options to avoid a crisis, Hayes believes that the damage is done before QT offers a way to reduce the amount.
“This scenario is less than ideal because it means that everyone who buys risky assets now will get a big drop in performance. 2023 could be as bad as 2022 until the Fed pivots,” he wrote in a blog post this month.
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