Speculation Surrounds Potential Impact of $97K Price Target on Bitcoin
Recent developments suggest that the U.S. Federal Reserve (Fed) might be shifting its focus away from quantitative tightening (QT), leading to a possible injection of additional liquidity into the financial markets. This anticipated move could have implications for assets with risk-on characteristics, such as Bitcoin [BTC].
At the start of the year, a significant event occurred related to the Fed’s QT strategy. The Reverse Repo Facility recorded a substantial $400 billion injection into the U.S. economy, thereby increasing market liquidity.
The Influence of U.S. Liquidity Injection on Bitcoin’s Performance
Historical data indicates a noteworthy correlation between the Repo Facility’s activity and Bitcoin’s price movements throughout 2021. If this pattern repeats itself and the Fed continues its liquidity injection, Bitcoin may experience a favorable uptrend.
An anonymous analyst known as Chicken Genius previously forecasted that the Fed’s QT program would conclude by the first quarter of 2025.
“Prediction: Quantitative tightening (QT) ends this quarter.”
Bitcoin Faces Selling Pressure from Long-Term Holders
Despite the positive outlook on the macroeconomic front, long-term holders of Bitcoin [LTH] have been consistently offloading their holdings.
Between September 2024 and early January 2025, the supply held by long-term investors decreased from 14.2 million to nearly 13.1 million BTC. This translates to a substantial sell-off of over 1 million BTC within three months.
Conversely, short-term holders have absorbed most of the BTC sold by long-term investors during this period. The supply held by short-term holders surged from 2.5 million to 3.8 million BTC.
Despite these developments, Bitcoin attempted to surpass the $95K mark at the time of reporting. A successful breach of the $97K threshold and key moving averages could trigger a bullish reversal in the higher timeframe market structure.
However, failure to sustain this momentum and a subsequent rejection at $97K might lead to a retracement towards the 100-day Exponential Moving Average (EMA) around $93K or the support level at $90K (cyan).