Bitcoin (BTC) recaptured $64,000 over the weekend but lost that support level in early trading on Monday.
The crypto market was volatile at the start of this week, with Bitpush data showing BTC soaring to a high of $65,545 in the early hours of the morning, but the trend quickly reversed after news broke that the U.S. Securities and Exchange Commission (SEC) had issued a Wells Notice to Robinhood’s crypto business unit, accusing it of securities violations.
Arthur points out that ordinary investors equate quantitative easing (QE) with money printing and inflation, which may be troublesome for the elite. Therefore, they need to change the terminology. The Fed's quantitative tightening (QT) program to reduce the rate of asset reduction sounds harmless. But in fact, by reducing the rate of QT from $95 billion per month to $60 billion, the Fed actually increased US dollar liquidity by $35 billion per month.
He continued: “When you factor in interest on reserve balances, reverse repurchase agreement (RRP) payments, and interest payments on U.S. Treasury securities, the reduction in QT increases the amount of stimulus provided to global asset markets each month.”
The Fed recently announced that it will cut QT at its May 2024 meeting. Arthur explained: “With a handy chart, we can see what the dollar liquidity looks like before and after the meeting.”
“Note that the QT term is based on the Fed’s weekly reported balance sheet, showing the actual average monthly reductions through 2024. As you can see, the Fed missed its target of $95 billion per month. This raises the question if the target was $60 billion per month, would the Fed also miss that target. Missing the target pace is positive for USD liquidity.”
Arthur stressed: "Higher interest rates require the Federal Reserve and the U.S. Treasury to pay interest to the wealthy, and combined with the deceleration of QT, this will further stimulate the economy."
Because of the United States' fiscal dominance, the statements of U.S. Treasury Secretary Janet Yellen carry more weight than those of any other monetary official. Every quarter, the U.S. Treasury publishes a QRA to guide the market on the amount and type of debt that must be issued to finance the government.
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Bitcoin strategy signal: Buy in May, hold on to the currency and wait for August to resume rising
“Slowly adding billions of dollars of liquidity each month will help dampen negative price volatility going forward,” Arthur said. “While I don’t expect cryptocurrencies to immediately fully realize the inflationary impact of recent U.S. monetary policy announcements, I do expect prices to bottom, oscillate, and begin to slowly rise.”
“With the arrival of summer in the northern hemisphere, some crypto investors may feel the market is active, they may feel that they have made a fortune in advance, so they will enjoy life in some popular places. I certainly don’t always stare at the price of Bitcoin. I can go dancing. The recent sharp sell-off provides a great opportunity for me to unlock my USDe stablecoins and use them to buy high beta junk coins.”
“I plan to trade Solana and the related Dogecoin momentum. For longer-term altcoin positions, I will increase my allocation to Pendle and look for other ‘discounted’ coins. I plan to increase my position during the rest of May. Then it’s just a matter of holding on to the coins and waiting for the market to realize the inflationary impact of the recent US monetary policy announcement.”
Have you noticed a phenomenon that the volatility of altcoins is even less than or equal to that of Bitcoin?
Generally speaking, when Bitcoin drops by one point, altcoins drop by at least 3 points. Now they are almost flat. What does this mean? We should think about this question seriously. After two consecutive rounds of sharp declines, altcoins have almost reached a point where they can no longer fall. Unless Bitcoin has a new round of sharp declines, such as falling to the range of 52,000, it is difficult for altcoins to fall sharply. Therefore, at this time, it is best not to sell at a loss. In view of the stability of altcoins, altcoins may usher in a wave of retaliatory rebounds in the future.
However, any prediction of future market conditions is risky. What we can do is to control our positions. No matter whether the market goes up or down, we can deal with it freely. Never bet on the market going up or down. This is the way to survive in the cryptocurrency circle.
