Impact of $173B Treasury Bills Auction on Crypto Market: Risks and Opportunities Explained

Cryptocurrency market turmoil, $173B Treasury bills auction, drained dollar liquidity, recession risk looming, heightened volatility, rising Treasury yields, artistic chiaroscuro style, tense atmosphere, shadowed Bitcoin and Ethereum symbols, strong U.S. Dollar pressure, all eyes on the U.S. Federal Reserve, June 14 decision pending, uncertain long-term outcome.

The U.S. Treasury Department made a swift decision to rebuild its depleted cash balance following the debt ceiling deal, announcing a significant $173 billion Treasury bills auction on June 5. With an expected $1 trillion in T-bills to be issued by the end of the third quarter, the crypto market, including Bitcoin, faces increased selling pressure as this move drains the U.S. dollar liquidity from the financial market and raises the risk of a recession.

Cryptocurrencies, being risky assets, could experience higher volatility and weaker returns under such circumstances. Higher Treasury yields and a strong U.S. dollar will put additional pressure on Bitcoin and other digital currencies. The U.S. Treasury Department auction schedule comprises Treasury bills worth $65 billion, $58 billion, and $50 billion, due to be auctioned on June 5.

The U.S. Treasury yields have already started to rise, as the U.S. Dollar Index (DXY) surpasses 104 to reach a high of 104.35. Concurrently, U.S. stock market futures indicate a flat opening on Monday, with oil and natural gas prices jumping over 2%.

Bitcoin has experienced a 2% drop within the past 24 hours, with its current price trading at $26,761, raising concerns that the BTC price may fall below $26,000. Meanwhile, after rising above $1,900 last week, ETH has slipped back to the previous support level trading at $1,870, representing a 2% decrease in the past 24 hours.

As the market dynamics evolve, all eyes will be on the U.S. Federal Reserve monetary policy decision due on June 14. The CME FedWatch Tool presents a 76% probability of the Fed maintaining its policy rate unchanged. Furthermore, Fed Chair Jerome Powell and other officials have hinted at a potential “skip” in June.

On the flip side, the crypto market could benefit from the massive sales of U.S. T-bills as some investors hedge against recession and inflation with cryptocurrencies. Despite the higher risks and weaker returns, the growing interest in digital currencies and their proven ability to rebound from crises could turn the increased U.S. Treasury bills auction into a positive catalyst for the market in the long run.

In conclusion, the U.S. Treasury Department’s decision to immediately auction $173 billion in Treasury bills after the debt ceiling deal may generate selling pressure on the crypto market. However, the long-term outcome of this move remains uncertain, leaving market participants cautiously observing the evolution of U.S. monetary policy and its effects on the cryptocurrency market.

Source: Coingape

Sponsored ad