According to Arthur Hayes, the likely Fed rate cut in September might not boost BTC and risk assets as expected.
Financial institutions are reportedly parking money into the Fed’s RRP for higher yields instead of risk assets like BTC.has shed 4%, slipping from $59.8k to barely holding above $56k at the time of writing. Market observers have widely expected the likely Fed rate cuts in September to be a potential catalyst for BTC and the risk market.
Per Hayes, BTC could chop or drop towards $50K as financial institutions direct liquidity to the Fed’s RRP for higher yields. Part of his latest analysis report‘As such, RRP balances should continue to rise, and Bitcoin, at best, will chop around these levels and, at worst, slowly leak lower towards $50,000.’RRP is a key Fed monetary policy tool, especially in controlling money supply and short-term interest rates. A sharp rise in RRP would limit US liquidity and vice versa.
For context, BTC has been positively correlated with US liquidity. As such, the aforementioned liquidity crunch might be bad news for the digital asset in the short term.was temporary, and the weakness would be a buying opportunity.
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