Bitcoin received a mixed macroeconomic signal this Tuesday after the end of quantitative tightening was confirmed. The Federal Reserve executed a massive overnight repurchase operation, according to data analyzed by the platform Barchart, consolidating a Fed liquidity injection that rivals the pandemic era.
The most recent figures on overnight reverse repurchase transactions indicate a significant capital flow. Specifically, $13.5 billion entered the banking system on Tuesday, an amount that stands out for its historical magnitude. This volume represents the second-highest record since the start of the COVID-19 crisis, a time when global stock markets suffered severe collapses.
Likewise, analysts noted that this total surpasses even the levels seen during the dot-com bubble. Barchart commented ironically on the situation, suggesting that although the number is alarming, the market could interpret it as a signal to continue trading as normal. This Fed liquidity injection comes at a critical time, just as the central bank officially stops shrinking its balance sheet this month.
Is a bearish reversion imminent for digital risk assets?
The move occurs in a precarious context for the global central bank easing process in 2025. On one hand, there are persistent rumors about Japan’s financial stability and bets on a tightening of conditions by its central bank. However, markets continue to expect the Federal Reserve to cut rates at its December 10 meeting, maintaining this trend into next year.
Furthermore, The Kobeissi Letter highlighted that December is historically one of the strongest months for the market. According to their analysis, upside momentum is strong in stocks, stating that the “bulls” are in control of the S&P 500. Nevertheless, this strength in traditional equity contrasts with the bearish divergence currently shown by cryptocurrencies.
Despite optimism in equities, Bitcoin could be leading a major reversion for risk assets. Mike McGlone, senior commodity strategist at Bloomberg Intelligence, warned his followers that extreme stock market complacency could suggest further downsides. In his opinion, the writing could be on the wall for investors who ignore current warning signs.
McGlone used historical valuations of Bitcoin versus gold to justify his negative forecast. If the BTC/USD pair traded at 13 times the value of gold, instead of the current 20 times, the Bitcoin price would be $50,000. This possible correction is based on the low volatility of the S&P 500, which is approaching its lowest year-end levels since 2017.
The market finds itself at a crossroads where traditional liquidity increases, but digital assets show structural weakness. Finally, although the Fed liquidity injection is usually positive, the current correlation suggests caution. Investors will need to watch if Bitcoin manages to hold its supports or if, effectively, it acts as a leading indicator of a broader correction in global risk assets.
