The 9.6% intraday Bitcoin (BTC) price correction on Jan. 3 dropped the price to $40,940 and created turmoil and substantial losses for derivative traders. This is evident from the $137 million in leverage long futures liquidations, marking the highest in over four months.
Fortunately, for bulls, Bitcoin price rebounded somewhat quickly and currently trades above $44,000. This has raised the question of whether BTC price can reach $46,000 before the upcoming SEC decision on the many pending spot Bitcoin exchange-traded fund (ETF) applications.
U.S government debt trend favors risk-on assets, including Bitcoin
The surging United States government debt and expectations of interest rate cuts by the U.S. Federal Reserve provide a constructive scenario for risk-on markets, including cryptocurrencies. Minutes from the recent Federal Open Market Committee meeting, released on Jan. 4, strengthened expectations of si quarter-point cuts this year. Notably, U.S. government debt interest has exceeded $1 trillion per year, as reported by Bloomberg.
Mounting debt and political discord in the U.S. have led to credit rating downgrades for the country. Fitch downgraded its sovereign debt rating from AAA to AA+ in August 2023, and Moody’s warned of a potential downgrade from the remaining AAA rating. House Republicans aim to cut spending below the levels agreed upon in the June debt ceiling deal, while Senate Democrats oppose such cuts, leaving the threat of a government shutdown looming.
Investors are pricing in further U.S. government debt issuance and the subsequent loss of the dollar’s purchasing power. This trend tends to affect other fiat currencies as central banks follow the Fed’s lead, keeping high interest rates to restrain economic growth. However, the U.S. deficit could become unsustainable if the monetary authority insists on achieving the 2% inflation target before lowering interest rates.
Bitcoin futures display resilience after the Jan. 3 price crash
To determine whether Bitcoin’s price gains after
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Author: Marcel Pechman
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