The US Federal Reserve anticipates a higher money supply within the economy if the US Reverse Repo continues to decline. This could benefit Bitcoin (BTC). The US Fed expects increased currency circulation, boosting investor sentiment. This follows a significant decline in the US Reverse Repo. Experts predict that any further decrease will likely lead to increased money printing by the US Federal Reserve.
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A lower US Reverse Repo is expected to attract more investments into Bitcoin, as investors may seek to divert their funds to digital assets, particularly BTC, which is leading the price charts. The US Fed is closely monitoring the US Reverse Repo, which has recently slipped below $100 billion, with a notable $65 billion drop in just two days. A decline in the US Reverse Repo is critical as it signals the level of money supply in the economy. Higher liquidity could boost investor confidence, encouraging allocations to riskier assets such as cryptocurrencies, including Bitcoin.
Investment sentiments are strengthening as the reported US CPI data stands at 2.9% as of December 2024. Although the US CPI data exceeded the forecasted estimate, investors remain optimistic that the inflation rate will eventually approach the desired 2%. The US Federal Reserve is expected to cut rates only twice, but developments like the falling US Reverse Repo should keep investor sentiments bullish.
Rising yields on long-term US debt, now around 5%, are prompting countries, including Britain, to rethink their investment policies. Higher yields on long-term US debt generally discourage risky investments worldwide, reducing the level of funds allocated to such portfolios. However, the US Reverse Repo, robust US employment data, and the potential for controlling inflation are keeping investor sentiments strong. It is also expected that Donald Trump will revamp crypto regulations to make investments more convenient and investor-friendly.
Bitcoin (BTC) Rally Ahead?
Given the anticipated risk appetite among investors, funds are expected to flow into Bitcoin (BTC) similar to 2021. The Federal Reserve may proceed with money printing, but Arthur Hayes predicts that the U.S. Treasury, through its General Treasury Account (TGA), will inject liquidity into the market by spending funds rather than issuing debt. BTC recently breached the $102k level again, trading at $101,634. This reflects an 8% increase in a week and a 140% increase in a year. There has been a 0.71% uptick in its 24-hour trading volume and a 1.84% rise in its open interest, according to Coinglass. The ongoing Bitcoin rally has surpassed most BTC price predictions, reaching a peak value of over $100k. The second consecutive inflow into spot Bitcoin ETFs also signals rising investor interest, with net inflows of $626.1 million, led by BlackRock’s IBIT.
Source: coingape.com
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