$77K likely the Bitcoin bottom as QT is ‘effectively dead’ — Analysts

Bitcoin appears to face significant hurdles in revisiting the $77,000 price threshold, as indicated by BitMEX co-founder Arthur Hayes following recent Federal Reserve announcements. On March 10, Bitcoin (BTC) approached $77,000 for the first time since November, according to CoinMarketCap data. However, Hayes suggested in a March 20 post that the Federal Reserve’s decision to scale back its quantitative tightening (QT) programs could signify a softened market environment for Bitcoin.

The Fed’s March 19 announcement, stating a reduction in monthly Treasury security sell-offs from $25 billion to $5 billion starting in April, has raised optimism among cryptocurrency investors. Hayes postulated that this marks the end of QT, stating, “Was BTC $77k the bottom, prob.” The implications of a reduced QT could ease liquidity pressures across risk assets, including Bitcoin, as QT strategies typically involve central banks divesting assets to curtail money supply and potentially raise interest rates.

The changing financial landscape presents new opportunities for the cryptocurrency market, particularly if the Supplementary Leverage Ratio (SLR) exemption is reinstated or if Quantitative Easing (QE) resumes. The SLR exemption, initially put in place during the COVID-19 pandemic, allowed banks to exclude certain securities from their leverage calculations. Meanwhile, QE aims to stimulate economic growth by encouraging spending.

Aligning with Hayes’ views, Real Vision’s chief crypto analyst Jamie Coutts expressed on March 19 that “QT is effectively dead,” pointing to recent decreases in treasury volatility and a positive overall market sentiment. Echoing this optimism, Axie Infinity co-founder Jeff “JiHo” Zirlin claimed the Fed’s slowdown would benefit both crypto and equity markets, suggesting that the central bank has substantial flexibility to support businesses and broader market stability.

Bitcoin venture capitalist Mark Moss added to the conversation, forecasting significant upward momentum now that QT is winding down. "The dam is going to break," he asserted, as sentiment within the crypto market has noticeably improved.

Additionally, the overall mood in the cryptocurrency sphere has shifted positively following the Fed’s announcements. The Crypto Fear & Greed Index, which gauges market sentiment, has transitioned into “Neutral” status at 49, moving away from the persistent “Fear” sentiment that dominated since February 26.

Despite Bitcoin currently sitting approximately 22% below its January peak of $109,000, Infinex founder Kain Warwick described this as a “normal mid-bull correction.” He maintained that a significantly larger downturn would be required to revise bearish predictions, asserting his belief in the cyclical nature of Bitcoin’s price movements for the remainder of the year.

As investors and analysts continue to assess the implications of the Fed’s policy shifts, the cryptocurrency landscape remains ripe for exploration and investment opportunities.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.