The U.S. Federal Reserve wrapped up its quantitative tightening (QT) program on Monday, December 1, punctuating it with $13.5 billion pumped into the U.S. banking system through overnight repos.
The figure was the second-largest liquidity injection since the COVID-19 era and surpasses even the Dot Com Bubble peaks, according to data Finbold retrieved from Barchart.
Treasury Securities Submitted. Source: Federal ReserveAs a result, investors and analysts have been left wondering whether risk assets such as equities and cryptocurrencies are going to be affected, especially as liquidity begins to loosen.
Analysts bullish on crypto and stocks
Fundstrat’s Tom Lee remains optimistic on crypto and stocks, noting in a CNBC interview that the central bank is going to provide the biggest tailwind in the following weeks.
With liquidity no longer being drained from the system, capital flows could begin accelerating into risk assets.
New Bitcoin all-time high in January?
Lee appears especially convinced when it comes to Bitcoin (BTC), arguing that higher liquidity historically correlates with stronger performance in risk-on assets.
Accordingly, he believes that a new all-time high for “digital gold” is possible by late January, even though the effects of the October slump are still noticeable and the Bank of Japan seems “hawkish.” When it comes to the S&P 500, he argued that 7,200-7,300 is likely in December.
All attention is, of course, on the December Federal Open Market Committee (FOMC) meeting, which the market hopes will clarify the Fed’s upcoming rate-cut path.
Featured image via Shutterstock
Source: https://finbold.com/federal-reserve-pumps-13-5-billion-into-the-u-s-banking-system/
