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Will Cryptocurrency Skyrocket? How a Shift in Federal Policy Could Unleash a Financial Flood
In the latest wave of financial news, market expert VirtualBacon suggests that the most pivotal event for the cryptocurrency sector this year may not be the much-anticipated Bitcoin (BTC) Halving or the approval of exchange-traded funds (ETFs). Instead, the focus is on a possible shift in the Federal Reserve’s (Fed) liquidity policy. After 18 months of tightening measures, the Fed appears poised to pause its quantitative tightening (QT) strategy, raising speculation about a potential return to stealth quantitative easing (QE).
In a recent post on social media platform X, VirtualBacon made a compelling case linking liquidity changes to the cycles of altcoins. Historical data shows that when the Fed halted QT in 2019, it triggered a significant rally for altcoins. Conversely, when the Fed initiated QT in 2022, altcoins reached their peak. As the Fed is expected to end QT by 2025, VirtualBacon anticipates a similar surge for altcoins, reinforcing the correlation: increased liquidity from the Fed generally translates to rising altcoin values. The pressing question now is, when will QT officially conclude?
The Significance of the Fed’s Language Shift
While the Fed may not explicitly announce a pivot to QE, the expert notes that a crucial moment will occur when they stop using the phrase “reducing the size of the balance sheet.” This terminology shift can signal market shifts. A notable instance was during the 2019 repo crisis, when banks faced severe cash shortages, prompting the Fed to inject $75 billion into the financial system. Although characterized as “not QE,” it effectively functioned as such, resulting in Bitcoin tripling in value within months.
Market Predictions from Financial Institutions
Major financial institutions are now weighing in on the potential end of QT. Goldman Sachs considers the upcoming October meeting as a likely point for the conclusion of QT, while Bank of America predicts it will cease by the end of the month. Evercore analysts believe the Fed may signal an end to QT very soon. The indicators that previously triggered market disruptions in 2019 are similarly indicating distress today. Regardless of the Fed’s official statements, it seems QT is approaching its conclusion, with stealth QE likely on the horizon. Such a shift could reintroduce liquidity into the markets, historically a catalyst for rising cryptocurrency prices.
Implications for Bitcoin and Altcoins
The CME FedWatch tool currently shows a staggering 96.7% probability of a rate cut this month, along with an 87.9% chance of another cut in December. Recently, the Fed’s chair hinted that QT would conclude “in the coming months,” signaling an imminent change. Despite current market uncertainties, VirtualBacon asserts that Bitcoin has not yet reached its peak. Out of 30 historical indicators typically signaling a bull market peak, none have activated thus far, suggesting there’s still room for growth.
Additionally, the global M2 money supply is on the rise, which historically leads Bitcoin prices by 10 to 12 weeks. Since the beginning of this month, data indicates an increasing money supply, hinting that Bitcoin’s next upward movement is on the horizon, albeit slightly lagging behind the liquidity curve. VirtualBacon believes that once the Fed pivots, a new altcoin season may commence, offering fresh opportunities for investors.
For those looking to navigate the evolving landscape of cryptocurrency, understanding these liquidity dynamics is essential. For more insights, you can explore more in the crypto section of our site. To get started trading, check out Binance for a robust trading platform.
In conclusion, as the Fed approaches a potential pivot in its liquidity policy, the crypto market stands on the brink of significant changes. If history is any guide, a surge in altcoin values may be just around the corner, making this a crucial time for investors to stay informed and engaged.
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