Alden: BTC price bottom is a “process”
What the rest of 2023 may hold, however, is still a topic of debate, and Alden suggests that it is naive to assume that the good times will continue unchecked.
The reason, she says, lies with the United States lawmakers and the Federal Reserve.
“BTC prices are heavily tied to liquidity conditions, and liquidity conditions have been improving since Q4 2022.”
“The FTX/Alameda collapse pulled down the industry in the second half of Q4 even as many other assets rallied (equities, gold, etc), and now it seems that BTC is playing a bit of catch-up, and getting back to where it would have been without the FTX/Alameda collapse occurring,” Alden continued.
“Considerable danger ahead”
What could lie beyond that “catch-up,” however, could be less savory for bulls.
The Fed is currently conducting quantitative tightening (QT), removing liquidity from the economy to fight inflation after several years of mass liquidity injections, which began in March 2020.
These are being mitigated thanks to U.S. domestic politics, but later on, the status quo could shift back to the kind of restrictive mood seen throughout Bitcoin’s bear market year of 2022.
“There is considerable danger ahead of for the second half of 2023,” Alden explained.
“Liquidity conditions are good right now in part because the U.S. Treasury is drawing down its cash balance to avoid going over the debt ceiling, and this pushes liquidity into the financial system. So, the Treasury has been offsetting some of the QT that the Federal Reserve is doing. Once the debt ceiling issue gets resolved, the Treasury will be refilling its cash account, which pulls liquidity out of the system. At that point, both the Treasury and Fed will be sucking liquidity out of the system, and that would create a vulnerable time for risk assets in general including BTC.”
If H2 proves to be Bitcoin’s reckoning, it would tie in with other warnings from market commentators regarding 2023.
In the long term, however, Alden is confident that Bitcoin will recover from its recent lows for good.
“I do think this is a deep value accumulation zone for BTC with a 3-5 year view, but traders should be aware of the liquidity risks in the second half of this year,” she concluded.
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