US Treasury Plans and Their Impact on Bitcoin Dynamics

The upcoming Federal Reserve meeting on January 31 and the release of the US Treasury’s borrowing plans could influence liquidity levels and, consequently, the dynamics of the leading cryptocurrency. This was reported by analysts at QCP Capital.

In the first instance, experts anticipate information on the pace of the central bank’s balance sheet reduction. A slowdown in this process would support liquidity levels in the system.

In the second instance, analysts expect the ministry to maintain its previous strategy of concentrating on short-term securities placements.

According to them, there are two reasons for this:

• The US presidential elections in November. Maintaining liquidity inflow and the growth of American stocks benefits the current administration (in this case, the Treasury Secretary has a better chance of retaining their position);
• In anticipation of a Federal Reserve rate cut, the US Treasury will delay borrowing in “long-term securities” until interest payments are lower.

The implementation of such a scenario would be positive for risky assets and cryptocurrencies in particular, the specialists noted. Otherwise, bond yields would rise, leading to a wave of sell-offs in the stock market, they added.

The current drop of Bitcoin below $40,000 was explained by experts as pressure from the liquidation of GBTC with a remaining AUM of $21 billion and concerns about creditors of Mt.Gox exiting positions. This could potentially lead to an additional supply of 142,000-200,000 BTC, they calculated.

Analysts at CryptoQuant pointed to increased selling pressure from whales.

“Previously, retail investors, similar to shrimps (<1 BTC), dominated. Now, large players are moving to take profits," they wrote.

Back in earlier reports, Galaxy Digital CEO Mike Novogratz downplayed the impact of GBTC sales on the prospects of digital gold.

Earlier, several experts noted the price’s dependence on the wave of position liquidations in the Grayscale exchange-traded fund.