Tightening USD Liquidity, Trump Administration’s Shift on BTC Reserve, and a Bearish RSI Divergence: A Perfect Storm for Bitcoin’s Price
Tightening USD Liquidity
The U.S. Treasury General Account (TGA) has seen a significant increase in its cash balance, from $623 billion to $800 billion in just four weeks, according to MacroMicro. This tightening of fiat liquidity, particularly the global reserve currency, the U.S. Dollar (USD), may lead to a slowdown in economic activity, higher borrowing costs, and a more challenging environment for risk assets, including cryptocurrencies.
Anddy Lian, a thought leader and intergovernmental blockchain expert, has echoed this sentiment, stating, "We’re looking at a scenario where key liquidity sources are drying up or being more tightly controlled. This could lead to a slowdown in economic activity, higher borrowing costs, and potentially a more challenging environment for risk assets, including crypto."
Trump Administration’s Shift on BTC Reserve
The Trump administration has been actively following through on various campaign promises, including tariffs, illegal migrants, and international affairs. However, one notable exception is the establishment of a strategic BTC reserve. President Donald Trump had initially expressed his support for a BTC reserve, which led to a surge in the cryptocurrency’s value from $70,000 to over $100,000.
However, the Trump administration has since shifted its stance, opting to "evaluate" the feasibility of creating such a reserve. This change in tone has been met with disappointment from crypto investors, who had been anticipating swift action on this initiative.
Jim Bianco, president and macro strategist at Bianco Research, LLC, expressed his concerns, saying, "Wait, Trump said he would do a $BTC Reserve, not promise to ‘evaluate it.’ Evaluate/Study is what Washington does when they don’t want to do something."
Reappearance of a 2021 Topping Pattern
For those monitoring technical charts, a bearish divergent pattern on the 14-week relative strength index (RSI) may be a cause for concern. This pattern, similar to the one seen in 2021, suggests a slowdown in the bullish momentum of Bitcoin’s price.
The RSI has produced a lower high relative to its December high, diverging bearishly from the continued price uptrend. This negative setup would be invalidated if the RSI crosses above the falling trendline, indicating a renewed bullish momentum.
Conclusion
The tightening of USD liquidity, the Trump administration’s shift on the BTC reserve, and the reappearance of a bearish RSI divergence may be creating a perfect storm for Bitcoin’s price. While the cryptocurrency’s ongoing price consolidation between $90,000 and $100,000 has been characterized as a bull run, these factors may lead to a slowdown in its momentum.
FAQs
Q: What is the significance of the Trump administration’s shift on the BTC reserve?
A: The shift in the Trump administration’s stance on the BTC reserve has led to disappointment among crypto investors, who had been anticipating swift action on this initiative.
Q: What is the impact of the tightening USD liquidity on the global economy and risk assets?
A: The tightening of USD liquidity, particularly the global reserve currency, may lead to a slowdown in economic activity, higher borrowing costs, and a more challenging environment for risk assets, including cryptocurrencies.
Q: What is the implication of the bearish RSI divergence on Bitcoin’s price?
A: The bearish RSI divergence may indicate a slowdown in the bullish momentum of Bitcoin’s price, potentially leading to a price correction or a more challenging environment for the cryptocurrency.
