Market Conditions Poised for Reversal
Equities and cryptocurrency markets may be setting up for a year-end reversal as liquidity improves and US monetary policy turns more supportive following the end of the record government shutdown. Improving market conditions will be driven by the growing liquidity, which has already returned $70 billion into markets since the end of the US government shutdown, with another $300 billion expected to return over the next five to six weeks as the Treasury General Account normalizes, according to investment management firm ARK Invest.
Another potential catalyst arrives on December 1, when the US Federal Reserve is scheduled to end its quantitative tightening program and pivot toward quantitative easing, a shift that involves bond-buying to lower borrowing costs and stimulate economic activity.
"With liquidity returning, quantitative tightening (QT) ending December 1st, and monetary policy turning supportive, we believe conditions are building for markets to potentially reverse recent drawdowns," wrote Ark in a Wednesday X post.
Crypto and AI Liquidity Squeeze May Ease
The current “liquidity squeeze” limiting the upside of the cryptocurrency and artificial intelligence markets is set to “reverse in the next few weeks,” wrote Cathie Wood, the CEO and chief investment officer of ARK Invest, in a Thursday X post.
Earlier in April, ARK Invest predicted a Bitcoin (BTC) price target of $1.5 million in the company’s “bull case,” and a $300,000 price target in the “bear case.”
Despite the recent crypto market correction and stablecoins subtracting from Bitcoin’s role as a safe-haven asset, the bullish price target remains unchanged.
“The stablecoins have accelerated, taking some of the role away from Bitcoin that we expected,” but the “gold price appreciation has been far greater than we expected,” explained Wood during a webinar on Monday, adding:
“So net, our bull price, which most people focus on, really hasn’t changed.”
Analyst Predictions and Market Outlook
Other popular crypto analysts have also predicted a significant crypto market rally with improving financial conditions in the US. Notably, BitMEX co-founder Arthur Hayes predicted a Bitcoin rally to $250,000 if the Federal Reserve announced a pivot to QE.
Still, cryptocurrency markets will continue lacking conviction until Bitcoin can reclaim the $92,000 level, which may “open the door to a broader recovery if macro conditions align,” Iliya Kalchev, dispatch analyst at digital asset platform Nexo, told Cointelegraph.