The US government is secretly injecting a massive amount of cash into the economy, and some think it could be huge for Bitcoin.
A Sneaky Cash Infusion
The US Treasury is releasing up to $842 billion, and it’s causing a stir. While the Federal Reserve is still trying to reduce the money supply (Quantitative Tightening or QT), this huge cash injection is like a secret version of quantitative easing – some are calling it “Not QE, QE.”
Macro analyst Tomas (@TomasOnMarkets) explained on X that this started because of the US debt ceiling. Since the government can’t borrow more money until the debt ceiling is raised, it’s using existing funds to pay its bills. This is effectively pumping money into the financial system.
He predicts around $600 billion will be injected between February 12th and April 11th. After that, things might get a little complicated.
Will it Actually Boost the Economy?
However, it’s not that simple. Two things could counteract this cash injection:
- The Federal Reserve’s QT: The Fed is still reducing the money supply by about $55 billion a month.
- Reverse Repo: Money market funds might park their cash in the Fed’s Reverse Repo facility, which takes money out of the market.
The net effect is uncertain. Last week, the net injection was around $50 billion, but this number will change.
The Political Standoff
The whole situation is tied to the political fight over raising the US debt ceiling. Republicans and Democrats can’t agree, leading to uncertainty. A proposed plan to tie tax cuts to raising the debt ceiling faces strong opposition. This political deadlock could drag the whole thing out.
What Does This Mean for Bitcoin?
Historically, Bitcoin has done well during periods of increased liquidity. While the Fed isn’t officially changing course, this extra cash could boost riskier assets like Bitcoin. However, the exact impact is unknown.
Bitcoin traders are closely watching the situation, hoping this secret cash injection will trigger Bitcoin’s next big price jump. At the time of writing, Bitcoin was trading at $96,424.
