"The Federal Reserve will slow down the balance sheet reduction, is a Bitcoin recovery coming?!"

"The quality of decision-making depends on the information you have and your ability to process that information. ——Bridgewater Associates Founder: Ray Dalio – “Principles” Principles of the Classic Principles

In the early morning, the Federal Reserve held an interest rate decision meeting and decided to maintain the interest rate unchanged, a decision that was already anticipated by the market. As stated in the previous article “The Federal Reserve Will Not Cut Rates, Trump May Trigger an Economic Recession, Bitcoin Faces a Critical Moment!”, the speech by Federal Reserve Chairman Powell is the real highlight of this meeting. He pointed out that quantitative tightening (QT) is expected to end around the second quarter——the Federal Reserve plans to slow down its balance sheet reduction actions starting in April, cutting the monthly redemption cap from $25 billion to $5 billion to ease the balance sheet contraction.

The 80% drop actually reflects that the Federal Reserve has stepped on the brakes regarding its quantitative tightening policy. This is undoubtedly a positive piece of news, as the market typically has a forward-looking nature, and this change suggests that quantitative easing (QE) policies may be on the horizon. Federal Reserve policy guidance: Quantitative tightening - interest rate hikes - pause in interest rate hikes - interest rate cuts - slowing down quantitative tightening - quantitative easing

Under the latest macro events, the price gap and liquidity of Bitcoin on the Chicago Mercantile Exchange (CME) have been filled. The current key question is whether this marks the top of the trend and whether future prices will continue to decline. “My view remains unchanged: whether the Bitcoin price can stabilize at the daily EMA-200 level will be the key to my judgment, and I will only be convinced when the price rises back to $90,000.” In terms of downside risk, the potential rebound zone is concentrated between $83,500 and $84,500, particularly the possibility of testing $83,500 again is worth paying attention to. These price levels will become important references for market trends in the short term. At the time of writing, the price of Bitcoin is below the daily EMA-200 level, trading at $85,123.

In the past 24 hours, large-scale liquidations of cryptocurrency futures contracts occurred at more critical levels of $84,000 and $85,000, with a small amount of liquidation happening between $86,000 and $87,500.

In the past half month, the cryptocurrency market has experienced 9 days where the liquidation amount reached at least 700 million dollars. Overall, in just these two short weeks, the market has lost more than 10.5 billion dollars, reflecting that the crypto market is a highly volatile risk market.

Despite the sluggish market, risk-weighted assets have seen an increase. The deposits in tokenized government bond products reached a historic high of $4.4 billion, with BlackRock’s BUIDL surpassing $1 billion for the first time. Overall, the growth rate in this sector has reached an astounding 490%. This trend brings new opportunities and hope for investors and market participants.

Note: The content represents the author’s personal views only and should not be construed as investment advice, nor should it be interpreted as tax, accounting, legal, business, financial, or regulatory advice in any way. You should seek independent legal and financial advice, including advice regarding tax consequences, before making any investment decisions.

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