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In a recent one blogging post, serial crypto entrepreneur and commentator Arthur Hayes predicted that new liquidity injections into the US economy following the inauguration of newly elected President Donald Trump could fuel a Bitcoin (BTC) rally in the first quarter of 2025.
Printing money to propel Bitcoin?
Despite surging past $100,000 on January 6, BTC suffered a sharp decline to $94,543 earlier today, casting doubt on the so-called “Trump rally” that many expected to last until Trump’s inauguration on January 20.
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The recent market action is consistent with Hayes’ December forecast, in which he warned of a potential “harrowing dump” in the cryptocurrency market around Trump’s inauguration. At the time, Hayes attributed this predicted sell-off to perceived regulatory disappointments from the new Trump administration.
However, in his latest post, Hayes suggested that the US Federal Reserve’s (Fed) plan to inject $612 billion of new liquidity into the economy could offset the lack of regulatory progress and create new bullish momentum for BTC could fuel. The co-founder of BitMex commented:
Team Trump’s disappointment over his proposed pro-crypto and pro-business legislation could be offset by an extremely positive dollar liquidity environment, up by up to $612 billion in the first quarter.
Hayes explained that the Fed is expected to increase money printing after Trump’s inauguration, likely causing BTC and other digital assets to rise to a local top before subsequently retreating. He added that market disappointment over the lagging crypto regulation under the Trump administration would worsen the correction.
The crypto entrepreneur recommended selling by the end of the first quarter of 2025 and waiting for favorable liquidity conditions to return in the third quarter of 2025. Once new liquidity comes to the market, Hayes suggested it would be time for risk-seeking investors to “turn the risk knob on epee. ”
Opinions are divided on BTC’s price action
While Hayes expects a BTC rally later this quarter, other analysts and market commentators remain cautious. For example, a recent report from 10x Research noted that the Fed’s delay in cutting interest rates could dampen BTC’s bullish momentum.
The same goes for technical analysis suggests that BTC may form a bearish head-and-shoulders pattern on the weekly chart, raising fears of a drawdown as high as $80,000. Yesterday’s inability to decisively reclaim the $100,000 price level has further rattled the bulls.
On the other hand, the CEO of Bitcoin mining company MARA recently said advocated a long-term strategy of ‘invest and forget’ for BTC. He suggested that a US strategic Bitcoin reserve could trigger a global race between countries to accumulate BTC, driving up its price.
There is institutional interest in BTC al is rising, as evidenced by the record inflow received by American spot Bitcoin exchange-traded funds (ETF). At the time of writing, BTC is trading at $95,154, down 3.6% in the last 24 hours.
Featured image from Unsplash, chart from TradingView.com