Key Points
- Bitcoin and the crypto market could peak in March due to the Fed’s quantitative tightening and US tax season.
- The US debt ceiling debate and tax season could increase market volatility and impact US liquidity.
Arthur Hayes, Co-Founder of BitMEX and CIO at crypto VC Maelstrom, predicts a local top in March for Bitcoin (BTC) and the overall crypto market. This is due to the Federal Reserve’s ongoing quantitative tightening (QT) and the US tax season in early April.
Impacts on US Liquidity
Hayes believes that these developments will negatively affect US liquidity, thus stalling risk on assets like BTC. He wrote in his blog, “My prediction is that the market peaks in mid to late March, so this equates to a removal of $180 billion worth of liquidity due to QT from January to March.”
Hayes also highlights the risk posed by the US debt ceiling, currently at $31.5 trillion. If Congress raises it, the US Treasury could borrow again, further draining market liquidity. He added, “Once default and shutdown are imminent, a last-minute deal will be reached, and the debt ceiling will be raised. At that point, the Treasury will be free to borrow on a net basis again and must refill the TGA. This will be dollar liquidity negative.”
US Tax Season and Debt Ceiling Debate
The US tax season, beginning on the 15th of April, could further affect money supply and stall risk-on assets, according to Hayes. Crypto options trading desk, QCP Capital, also warns that the US debt ceiling debate could drive market volatility.
In a recent Telegram broadcast, QCP Capital stated, “It won’t be smooth sailing into January, as structural risks loom. The U.S. Treasury debt ceiling reinstatement is projected to be reinstated mid-month, requiring the Treasury to adopt “extraordinary measures” to fund government expenditures. This could trigger market volatility as discussions around the issue intensify.”
These macro risks could impact January’s bullish outlook for BTC. The cryptocurrency recently surged above $100K for the first time in two weeks, indicating renewed optimism ahead of Donald Trump’s presidential inauguration on the 20th of January.
However, these risks align with a key top signal– Realized Profit/Loss using the 355-day moving average. Pseudonymous on-chain analyst, Bitcoindata21, suggests that this metric is close to triggering a euphoria sell signal.
