Bitcoin (BTC) could face potential losses going into Q3 of 2023 as U.S. lawmakers are expected to reach an agreement on raising the debt ceiling. With the increase in the debt limit, the U.S. Treasury could issue new bonds and raise cash to meet its previous obligations. Consequently, the Treasury General Account’s cash pile could rise from $95 billion in May to $550 billion in June and $600 billion in the three months afterward.
Ari Bergmann, founder of risk management firm Penso Advisors, predicts that the Treasury’s liquidity will surpass $1 trillion by the end of Q3, 2023. When the debt limit resolution is reached, Bergmann believes that a sudden, significant drain of liquidity will negatively impact risk asset markets like stocks, Bitcoin, and other cryptocurrencies.
Following this drop in liquidity, these riskier assets could all experience downward price pressure. Bloomberg predicts that the supply burst will quickly diminish the banking sector’s liquidity, tighten the screws on the US economy, and raise short-term funding rates.
According to Bank of America Corp., this supply burst could hold the same economic impact as a quarter-point interest rate hike. Facing these macroeconomic challenges, Bitcoin may struggle to reclaim its yearly highs of over $30,000 in the upcoming months, says independent market analyst Income Sharks. The analyst suggests that new money may not be coming into Bitcoin, and the cryptocurrency’s price will likely range between $20,000 to $30,000.
Without a new narrative or a rally in the stock market, Income Sharks predict the 2024 U.S. elections to be the next major catalyst for the cryptocurrency. Meanwhile, BTC’s price chart technicals show consolidation below its 50-day exponential moving average (50-day EMA) at around $27,650. If Bitcoin cannot decisively break out above this resistance area, the cryptocurrency may experience a pullback.
In such cases, traders should watch for a potential correction towards the 200-day EMA near $25,000—especially if the Federal Reserve hikes its interest rates by 25 basis points in June, as this would constitute the next major support area for the digital asset. It is essential for investors and traders to conduct thorough research before making decisions, as every investment move carries a level of risk.