Bitcoin (BTC) bulls do not need to wait long for the United States to start printing money again, commentators believe.
The latest analysis of U.S. macroeconomic data has led one market strategist to predict quantitative tightening (QT) ending to avoid a “catastrophic debt crisis.”
Analyst: Fed will have “no choice” with rate cuts
The Federal Reserve continues to remove liquidity from the financial system to fight inflation, reversing years of COVID era money printing.
While interest rate hikes look set to continue declining in scope, some now believe that the Fed will soon have only one option — to halt the process altogether.
“Why the Fed will have no choice but to cut or risk a catastrophic debt crisis,” Sven Henrich, founder of NorthmanTrader, summarized on Jan. 27.
“Higher for longer is a fantasy not rooted in math reality.”
Henrich uploaded a chart showing interest payments on current U.S. government expenditure, this now hurtling toward $1 trillion a year.
A dizzying number, the interest comes as a result of U.S. government debt being over $31 trillion, the Fed having printed trillions of dollars since March 2020 alone. Since then, interest payments themselves have gone up by 42%, Henrich noted.
The phenomenon has not gone unnoticed elsewhere in crypto circles. Popular Twitter account Wall Street Silver compared the interest payments as a portion of U.S. tax revenue.
“US paid $853 Billion in Interest for $31 Trillion Debt in 2022; More than Defense Budget in 2023. If the Fed keeps rates at at these levels (or higher) we will be at $1.2 trillion to $1.5 trillion in interest paid on the debt,” it wrote.
“The US govt collects about $4.9 trillion in taxes.”
Such a scenario might be music to the ears of those with significant Bitcoin exposure. Periods of “easy” liquidity have corresponded with increased appetite for risk assets across the mainstream investment world.
The Fed’s unwinding of that policy accompanied Bitcoin’s 2022 bear market, and a “pivot” in interest rate hikes is thus seen by many as the first sign of the “good” times returning.
Crypto pain before pleasure?
Not everyone, however, agrees that the impact on risk assets, including crypto, will be all-out positive prior to that.
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