When it comes to price recovery for Bitcoin this year, when US liquidity conditions are decisive, all is not well.
Bitcoin price bottom process
Crypto-wide optimism is growing as BTC/USD largely retains its 40% higher year-on-year levels. But what the rest of 2023 will bring is still a matter of debate, and Alden suggests it’s naive to assume that the good days will continue unchecked.
He says the reason lies in United States lawmakers and the Federal Reserve. He also summed up about the current state of Bitcoin by saying, ‘I expect the BTC base to be a process. In his statement he said:
“BTC prices are heavily dependent on liquidity conditions and liquidity conditions have been improving since Q4 of 2022.”
This recovery has effectively removed all traces of the FTX debacle from the chart and BTC/USD is now spinning around its highest levels since mid-August.
Alden said, ‘The collapse of FTX/Alameda dragged the industry down despite the recovery of many other assets (stocks, gold, etc.) in the second half of Q4, and now BTC is catching up a bit and is back to where it would have been without the FTX/Alameda collapse.’ he continued. cryptocoin.com As we mentioned, BTC/USD was trading at about $22,700 at the time of writing.
There is a serious danger ahead.
However, what could be beyond this ‘catch-up’ might be less palatable to the bulls. The Fed is currently running quantitative tightening (QT), which cuts liquidity from the economy to combat inflation after several years of massive liquidity injections that began in March 2020.
These are mitigated thanks to US domestic politics, but then the status quo may return to the kind of restrictive mood seen during Bitcoin’s 2022 bear market year. “There is a significant danger for the second half of 2023,” said Alden. He then made the following statements:
“Liquidity conditions are currently good in part because the US Treasury is pulling down the cash balance to keep up with the debt ceiling, which pushes liquidity into the financial system. The Treasury offsets some of the QT that the Federal Reserve does. Once the debt ceiling issue is resolved, the Treasury will refill the cash account, which will draw liquidity from the system. At this point, both the Treasury and the Fed will draw liquidity from the system, creating a vulnerable time for risky assets in general, including BTC.”
If H2 proves to be Bitcoin’s account, it will be linked to other market commentators’ warnings about 2023. Arthur Hayes, former CEO of the exchange BitMEX, also has a much more pessimistic forecast for the year thanks to Fed policy.
In the long run, however, Alden seems confident that Bitcoin will survive its recent lows forever. “I think this is a deep value accumulation zone for BTC from a 3-5 year perspective, but traders should be aware of the liquidity risks in the second half of this year,” he concluded.
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