With the dust settling around the “Trump pump” trade, Bitcoin (BTC) price has established a range between $100,000 and $110,000 since the newly elected US president joined office. The crypto asset jumped 3.78% on Jan. 21, but its price action has started to consolidate over the past 24 hours.
With BTC failing to demonstrate a clear directional headwind on the lower time frame (LTF), one analyst believed that the sideways movement might extend until the end of the month.
Will quantitative easing fuel Bitcoin’s next rally?
Krillin, a full-time crypto trader, hinted at the possibility of sideways consolidation between $100,000 and $110,000 until the Federal Open Market Committee (FOMC) meeting takes place on Jan. 28-29. The trader said,
“Assuming no BoJ scam, we likely chop between 100k and 110k till FOMC end of month.”
The analyst indicated the possibility of another dump since the current expectation is that there will be no interest rate cuts on Jan. 29. The CME FedWatch tool currently projects a 99.5% chance that interest rates will remain unchanged at 4.25% to 4.5%.
However, a dovish press conference or any hints at Quantitative Easing (QE) to address market functioning might trigger the next leg up for risk assets.
Data suggests that as of Jan. 22, the US national debt stands at $36.21 trillion, more than the allotted amount of $36.1 trillion. With the debt ceiling reached now, the forecasted solution is to raise it again. This is not new for Congress, with the administration adjusting the debt ceiling 78 times since 1960.
This might lead the government to finally partake in quantitative easing (QE), where the US Federal Reserve could resort to large-scale asset purchases. This would inject liquidity into the market, a positive catalyst for risk assets. One particular way to track liquidity injection would be to identify a reversal in the Fed’s balance sheet trends. The balance sheet has declined since April 2022, falling from almost $9 trillion to $6.8 trillion on Jan. 15 because of Quantitative Tightening (QT).
Federal Reserve balance sheet. Source: Federal Reserve.gov
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