The US Treasury is about to unleash a barrage of liquidity that will push Bitcoin past its all-time high of $73,700.
That’s according to Arthur Hayes, co-founder of BitMEX and one of crypto’s foremost macroeconomics analysts.
“The next stop for Bitcoin is $100,000,” Hayes wrote in a Tuesday blog post.
“The combination of a dollar liquidity-inspired Bitcoin and Ether rally into year-end will create a strong foundation for the return of a sexy shitcoin soirée,” he added, referring to cryptocurrencies that are neither Bitcoin or Ether.
Altcoin season soon?
US Secretary Janet Yellen wants to keep the economy humming to ensure Vice President Kamala Harris wins the presidential election, Hayes argued. Harris swore in Yellen to the role in 2021.
To ensure a Harris win, the Treasury will inject a sizable amount of liquidity in the financial system before the year’s end, Hayes said.
That’s great news for Bitcoin, which tends to perform extremely well during periods of rapidly increasing liquidity conditions.
“If this relationship holds true, Bitcoin will quickly retrace the dump caused by the yen strengthening,” Hayes said.
And if Bitcoin goes to the moon, the rest of the crypto market will follow, Hayes said. He predicted that Solana will soar 75% to $250 — just $10 shy of its all-time high.
”Altcoin season will return only after Bitcoin and Ether decidedly break through $70,000 and $4,000, respectively,” he said.
Injecting $1 trillion
There are two ways the Treasury can go about injecting liquidity in the system, Hayes said.
The first is to empty the Reverse Repo Program, which is a pool of money worth $321 billion. The Federal Reserve spun up the scheme during the pandemic as part of its quantitative easing programme.
The Federal Reserve incentivises banks to park their funds in the RRP by offering them interest on their deposits. But the US Treasury can coax funds into leaving the RRP by issuing Treasury bills with a higher yield, Hayes argued.
The US Treasury announced recently that it will issue $271 billion worth of such bonds before December 31.
It will also purchase $30 billion worth of off-the-run Treasuries — older and less liquid bonds — through its buyback programme each quarter. That move, Hayes said, equates to issuing another $30 billion in Treasury bills.
That’s a total of $301 billion that’s likely to exit the RRP and flow back into the economy by snatching up Treasury bills before the election.
But there’s a second way the Treasury can inject money into the system.
It can spend the $750 billion in the Treasury general account, which functions as the government’s own checking account, under the guise of forestalling a government shutdown, Hayes said.
Injecting between $301 billion and $1 trillion into the markets before the end of the year will “create a glorious bull market in all types of risk assets, including crypto, all in time for the election,” Hayes said.
Crypto market movers
Bitcoin is up 2.6% over the past 24 hours to trade at $60,833.
Ethereum is up 2.6% to trade at $2,724.
What we are reading
Why one MakerDAO adviser is ringing the alarm over Wrapped Bitcoin — DL News
Best Bitcoin Lending Platforms For August 2024 — Milk Road
Kamala Harris’ Reported Economic Advisors Have Crypto Up In Arms — Unchained
Canadian Crypto Exchange ezBtc Founder Accused of $9.5 Million Fraud — Milk Road
Why PayPal’s $733m stablecoin is growing faster on Solana than Ethereum — DL News
Tom Carreras is a markets correspondent for DL News. Got a tip about Bitcoin and macroeconomics? Reach out at tcarreras@dlnews.com.
