Bitcoin
U.S economy, liquidity injections, and how they might help crypto & Bitcoin
A weaker dollar drives investors to assets like cryptocurrencies, often viewed as hedges against inflation and devaluation.
- Fed liquidity has surged by $395 billion since the start of the year, marking the largest ten-day hike in two years
- Could this spark interest in riskier assets again?
Two market-wide crashes in less than a month reveal a striking shift – The growing ‘inverse’ correlation between macro trends and riskier assets. If the U.S. economy continues to show strength – like the 256K jobs added in December – the crypto market could take an unexpected turn.
With that in mind, keeping a sharp eye on the U.S. economic calendar is more important than ever.
Unexpected opportunities ahead?
With the Dollar Index (DXY) staying firmly above 109 and the 10-year Treasury yield soaring to 4.79% – its highest level in 14 months – it’s easy to assume that a shift towards riskier assets like crypto or stocks is still off the table.
The S&P 500 recently lost $800 billion in market cap and fell by 4.5% from its December high. At the same time, the crypto market has dropped 8% in just a week, falling from $3.60 trillion. Given these trends, the case for avoiding riskier assets seems strong.
But here’s the twist – Net Federal Reserve liquidity has hiked by about $395 billion since the start of the year. High liquidity could signal a potential devaluation of the U.S. dollar, meaning the value of each dollar could shrink.
Interestingly, the Dollar Index has hit higher highs for four straight days, pushing its RSI into overbought territory. A correction could be near, and if the dollar weakens, Treasuries may become less attractive – A trend worth watching closely in the days ahead.
Source: TradingView
Adding another layer, speculation is rising about liquidity injections from the Treasury General Account (TGA). As the U.S. approaches its debt ceiling, the Treasury may release significant liquidity into the market.
As a result, this could further shake things up in the weeks ahead.Market still remains cautious
The surge in liquidity from both the Fed and U.S. government is certainly a bullish sign, injecting fresh capital into the market. With the anticipated “Trump pump” adding to the optimism, things are looking up – At least for now. However, there’s a catch.
With the debt ceiling fast approaching, investors may turn towards safer, more stable assets rather than diving into the volatile crypto market.
Read Bitcoin’s [BTC] Price Prediction 2025-26
Why? Treasury yields are set to rise, especially with the Fed signaling fewer rate cuts and the government counting on them to raise capital.
While there’s hope, all eyes are now on the new administration. Will they push through tax cuts to unlock even more liquidity? If they do, it could devalue the dollar and make Treasuries less appealing.
The pressure’s on. Trump will have to prove he’s serious about delivering on those promises. If not, 2025 could be a wild ride for riskier markets.
