- The Fed injected $400B liquidity into the U.S. market on the 1st of January.
- But long-term holders’ relentless sell-off has been absorbed by STH (short-term holders).
The U.S. Federal Reserve (Fed) may be pivoting away from quantitative tightening (QT), a move that could inject more liquidity into the market and fuel risk-on assets like Bitcoin [BTC].
On the 1st of January, one of the factors used to gauge the Fed’s QT, Reverse Repo Facility, printed $400B. This meant that $400B was injected into the US economy, boosting market liquidity.
Will U.S. liquidity injection pump BTC?
Source: X
Historically, a sharp uptick in the Repo Facility correlated with a strong BTC uptrend in 2021. So, BTC could expect upside momentum if the trend repeats and the Fed liquidity injection continues.
Pseudonymous macro and crypto analyst, Chicken Genius, had previously stated that the Fed’s QT would end in Q1 2025. He said,
“Prediction: Quantitative tightening (QT) ends this quarter.”
Long-term holders dump Bitcoin
Despite the positive update from the macro front, BTC long-term holders [LTH] have been selling relentlessly.
Source: Alphractal
Since mid-September 2024, LTH supply has shrunk from 14.2M to nearly 13.1M in early January 2025. In short, they have sold over 1M BTC coins in three months.
However, the short-term holders have absorbed nearly all the LTH sell-offs. Over the same period, the STH supply soared from 2.5M to 3.8M BTC.
Read Bitcoin [BTC] Price Prediction 2025-2026
That said, the cryptocurrency attempted to reclaim $95K at press time. The higher timeframe market structure could be flipped bullish if it decisively closed above $97K and key moving averages.
Source: BTC/USDT, TradingView
However, another price rejection at $97K could drag it lower to the 100-day EMA of $93K or the demand support at $90K (cyan).
