The bitcoin price has shot back toward $30,000 per bitcoin, climbing to its highest level since early May, with the ethereum price following suit as rumors swirl of a possible China-led crypto price bull run.
Now, with a deal all but done to avert a “catastrophic” U.S. debt default, markets are nervously eyeing what JPMorgan analysts estimate could be the issuance of nearly $1.1 trillion in new Treasury bills, potentially sucking hundreds of billions of dollars from the market.
“Our concern is that if liquidity starts leaving the system, for whatever reason, this creates an environment where markets are crash-prone,” said Alex Lennard, investment director at global asset manager Ruffer, told Reuters.
Mike Wilson, equity strategist at Morgan StanleyMS +1.1%, added the huge Treasury bills issuance, designed to refill empty U.S. Treasury coffers “will effectively suck a bunch of liquidity out of the market place, and may serve as the catalyst for the correction we have been forecasting.”
Meanwhile, economic data out this week could cue up further Federal Reserve interest rate hikes following the Fed’s historically rapid ramp-up over the last year as it wrestles with stickier-than-expected inflation.
“The debt ceiling issue could soon be a thing of the past but the future trajectory of the Fed funds rate will continue to weigh on the market sentiment and bitcoin’s weekend rally could be hindered depending on the series of economic data slated for this week, such as ISM’s manufacturing PMI and May’s jobs report,” Yuya Hasegawa, crypto market analyst at Tokyo-based Bitbank, said in an emailed note.
On Friday, the latest U.S. non-farm payroll data will shed light on the Federal Reserve’s attempts to cool the red-hot jobs market. Economists are projecting a gain of 180,000 jobs, down from just over 250,000 jobs added in April. Unemployment is forecast to tick slightly higher to 3.5%, up from April’s 3.4%.
“Economic data in the last month have indicated the resilience of the U.S. economy,” added Hasegawa. “Most of all, core indexes for CPI and PCE, as well as trimmed mean PCE inflation rate for April did not show any significant improvements. The Fed Funds futures market now prices in roughly 65% chance of another rate hike in June, and if the number keeps going up, it will likely be a headwind for bitcoin and other cryptocurrencies.”