Given Bitcoin’s major price movement, financial gurus are now theorizing on the possible influence of Federal Reserve monetary policy modifications on the cryptocurrency market.
Bitcoin’s price has increased by 30% since the beginning of the 2023, surpassing $23,000 after dipping below $16,000 late last year.
The recent rally in the alpha coin was triggered by a decline in the U.S. Consumer Price Index, indicating a likely deceleration in interest rate hikes.
Nevertheless, the founder and former chief executive of the BitMex crypto exchange has cautioned that Bitcoin and the market for crypto assets may experience a decline if the U.S. Federal Reserve does not adjust its monetary policies.
Bitcoin Might Fall To $15,000: Hayes
Arthur Hayes, former BitMex big boss, claims in a new treatise on U.S. macroeconomic policy that a “disastrous global financial crisis” could be poised to submerge BTC and the crypto market. He asserts that the current Bitcoin surge should not be seen as the start of a new bull run.
Recent figures from the U.S. Bureau of Labor Statistics indicate that inflation peaked at about 10% in the middle of 2022 and is currently declining more toward the desired levels of 2%.
A number of market observers believe this trend may suggest a policy shift by Federal Reserve Chairman Jerome Powell, away from Quantitative Tightening (QT) in reaction to the risk of a recession.
Powell stated that rates will need to increase in 2023, a sentiment mirrored by several Fed members who have advocated boosting the Federal Reserve’s target over 5%.
BTC And The Course Of USD Liquidity
Many say that the cryptocurrency market, and Bitcoin in particular, functions independently of central banks and other financial organizations. In addition, due to the dollar’s status as the worldwide reserve currency, the price of Bitcoin is highly dependent on the future course of global USD liquidity.
Recent market performance indicates that investors forecast a shift in Federal Reserve policy. Some analysts anticipate that if the Federal Reserve follows through with a policy adjustment, Bitcoin’s current advance might continue and a “secular bull market” could emerge.
According to a blog entry published by Hayes on January 19:
“If the Fed does not follow through with a pivot, or multiple Fed governors talk down any expectation of a pivot even after ‘good’ consumer price index (CPI) prints, bitcoin will likely crash back down towards previous lows.”
Hayes added that the current gains may be part of Bitcoin’s rebound from its lows, but urged investors to anticipate a new plateau and sideways trading until the liquidity conditions for the U.S. dollar improve.
Hayes expects the Fed to finally intervene to stabilize the markets, despite his warnings of an impending market collapse.
As of this writing, Bitcoin is trading at $22,794, up 9.3% in the last seven days, data from Coingecko shows.
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