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Fed Money Printing Could Extend Bitcoin Rally
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The United States central bank (Fed) and its economic policies have catalyzed much of the recent asset appreciation. This can happen with Bitcoin (BTC), whose price is directly related to the increase in the monetary basethat is, the issuance of dollars in the USA.
And recently, an indicator known as US Reverse Repo recorded a significant decline. According to experts, the drop in this indicator means that the Fed should return to inject liquidity into the market. In this case, analysts expect that this currency injection could reach US$100 billion.
That said, there is speculation that a smaller US Reverse Repo will bring more investments for the Bitcoin marketas investors would want to divert their funds into digital assets, especially BTC as it is leading the price charts.
Reverse Repos are liquidity injection or removal operations used by the Fed to keep interest rates under control in the USA. They also serve as a mechanism for adding or removing liquidity in the market, especially in times of economic crisis.
$100 billion in liquidity on the way
The Fed is keeping an eye on Reverse Repo, which fell below $100 billion. Remarkably, $65 billion fell in just two days. Any decline in the US Reverse Repo is critical as it signals the level of money supply in the economy. But a drop in this intensity represents a large increase in liquidity.
Greater liquidity, in turn, would bring more confidence among investors to allocate your funds into riskier assets such as cryptocurrencies, including Bitcoin. When there is more money in the economy, interest rates tend to fall, which makes it cheaper to take out financing and more advantageous to invest in risky assets.
Investment sentiments are gaining more traction as US inflation data they are at 2.9% in December 2024. Although the data exceeded the forecast estimate, investors are optimistic that the inflation rate will eventually approach the 2% mark.
The US Federal Reserve is expected to cut interest rates just twicebut developments like the Reverse Repo crash should keep investor sentiments upbeat. If this happens, the Fed could drive strong increases in BTC even while leaving interest rates still high.
US long-term debt yields are now around 5%one of the highest interest rates since the beginning of the 2000s. And it is precisely this spike in rates that has led investors to rethink their allocation policies.
When interest rates are high, long-term U.S. debt securities become more profitable. In the end, earning 5% in “risk-free” dollars is seen by investors as more advantageous. Therefore, high interest rates discourage larger investments around the world.
Fed Money Printing Could Extend Bitcoin Rally
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Fed Money Printing Could Extend Bitcoin Rally
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Fed Money Printing Could Extend Bitcoin Rally