Bitcoin faces “considerable danger” from the Fed in 2023 Lyn Alden

[ad_1]

Bitcoin (BTC) still faces considerable danger in 2023 as macroeconomic conditions dictate price action.

That’s according to economist Lyn Alden, who in private comments to Cointelegraph warned that Bitcoin remains bullish after its January gains.

Alden: BTC price bottom is a “process”

Optimism is growing across the cryptocurrency as BTC/USD globally maintains levels, which are 40% higher than at the start of the year.

What the rest of 2023 might contain, however, is still up for debate, and Alden suggests it’s naive to assume the good times will continue unchecked.

The reason, she says, lies with US lawmakers and the Federal Reserve.

I expect the BTC bottom to be a process, she summed up about the current state of Bitcoin.

BTC prices are strongly tied to liquidity conditions, and liquidity conditions have improved since Q4 2022.

This recovery has effectively removed all traces of the FTX debacle from the chart, with BTC/USD now hovering around its highest levels since mid-August.

The FTX/Alameda collapse sent the industry tumbling in the second half of Q4 even as many other assets rallied (stocks, gold, etc.), and now it looks like BTC is playing a bit catch-up and back to where it would have been had it not been for the FTX/Alameda collapse, Alden continued.

BTC/USD was trading at around $22,600 at the time of writing, according to data from Cointelegraph Markets Pro and TradingView.

BTC/USD 1-day candle chart (Bitstamp). Source: TradingView “Considerable Danger Ahead”

What might lie beyond that catch-up, however, might be less tasty for the bulls.

Related:BTC metrics come out of capitulation 5 things to know about Bitcoin this week

The Fed is currently carrying out quantitative tightening (QT), withdrawing liquidity from the economy to fight inflation after several years of massive liquidity injections, which began in March 2020.

These are mitigated thanks to US domestic politics, but down the road the status quo may revert to the kind of restrictive mood seen throughout 2022 of the Bitcoin bear market.

There is considerable danger ahead for the second half of 2023, Alden explained.

Liquidity conditions are good right now, in part because the US Treasury is tapping into its cash balance to avoid breaching the debt ceiling, which is pushing liquidity into the financial system. So the Treasury has offset some of the QT that the Federal Reserve is making. Once the debt ceiling problem is resolved, the Treasury will replenish its cash account, which will remove liquidity from the system. At this point, the Treasury and the Fed will suck liquidity from the system, which would create a vulnerable period for risky assets in general, including BTC.

If H2 turns out to be a Bitcoin calculation, it would be linked to other warnings from market commentators regarding 2023.

As Cointelegraph reported, Arthur Hayes, former CEO of exchange BitMEX, has a much bleaker outlook for the year, also thanks to Fed policy.

In the long term, however, Alden is confident that Bitcoin will definitely recover from its recent lows.

I think this is an area of ​​deep value accumulation for BTC with a 3-5 year view, but traders should be aware of liquidity risks in the second half of this year, he said. she concluded.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

[ad_2]