- BTC could stall at the end of the first quarter due to limited US liquidity.
- The debate over the US debt ceiling could cause additional volatility in January.
Bitcoin [BTC] and the overall crypto market could follow the 2024 trend and peak in March before an extended correction takes place.
According to Arthur Hayes, co-founder of BitMEX and CIO at crypto VC Maelstrom, the local top in March will be driven by the Fed’s continued quantitative tightening (QT), in addition to tax season in early April.
Hayes added that both developments would be a net negative for US liquidity, reducing risk on assets like BTC. In his last blogginghe wrote,
“My prediction is that the market will peak in mid to late March, so this amounts to a removal of $180 billion in liquidity due to QT from January to March.”
US Debt Ceiling Risk
Another risk factor Hayes highlighted was the U.S. debt ceiling, which currently stands at $31.5 trillion unless Congress raises it. An upward revision could see the U.S. Treasury reborrow and remove additional market liquidity. He added:
“Once bankruptcy and shutdown are imminent, a last-minute deal will be reached and the debt ceiling will be raised. At that point, the Treasury will again be free to borrow on a net basis and must replenish the TGA. This will be dollar liquidity negative.”
The U.S. tax season starting April 15 will further impact the money supply and potentially sneak up on risky assets, Hayes noted.
Analysts at crypto options trading desk QCP Capital echoed a similar sentiment, warning that the US debt ceiling debate could drive market volatility.
In its latest Telegram broadcast, the company said declared,
“It won’t be smooth sailing in January, because structural risks are lurking. The reinstatement of the US Treasury debt ceiling is expected to be reinstated by mid-month, requiring the Treasury Department to take “extraordinary measures” to finance government spending. This could lead to market volatility as discussions on this issue intensify.”
The above-mentioned macro risk could dent the bullish outlook for BTC in January.
The cryptocurrency rose above $100,000 for the first time in two weeks, underscoring renewed optimism ahead of Donald Trump’s presidential inauguration on January 20.
That said, the risk almost matched a key top signal: realized gain/loss based on the 355-day moving average.
According to a pseudonymous on-chain analyst: Bitcoin data21a benchmark was about to trigger a euphoric sell signal.
Source: Glassnode