Three important factors for Bitcoin price by the end of the year

The last market correction Bitcoin coincided with tensions in the US credit market. This is justified – BTC often acts as a barometer of broad market sentiment and is sensitive to any disruptions in the financial system.

Historically, the increase in US credit spreads – the difference between corporate and Treasury bond yields – has led to a sell-off BitcoinThis situation occurred after the collapse of First Brands and other companies in the automotive sector, which sparked increased concerns about the health of the credit market. Furthermore, Bitcoin's price at one point began to strongly correlate with the share price of investment bank Jefferies, which had exposure to First Brands, with its shares falling by 30%. In other words, easing concerns about the US credit market could be important for Bitcoin's future performance, although that's not the focus of this article.

Today, we're focusing on macroeconomic factors, not on whether the credit problem is large or small—because that's currently impossible to definitively assess. However, we do know that the Fed is approaching a cycle of interest rate cuts, which could begin as early as October and continue into December and January. As a result, the interest rate could fall by a total of 75 basis points.

If, in addition, year-on-year inflation increases due to base effects, real interest rates could fall by as much as 85–95 basis points. This is a significant easing rate that not only improves sentiment through lower discount rates but also reduces the profitability of saving in the US, which could induce some capital to migrate towards riskier assets – including cryptocurrencies.

The second important factor is the possible termination of the QT program (quantitative tighteningSome institutions assume that the current tensions in the money market – also unfavorable for Bitcoin – could prompt the Fed to announce the end of QT as early as the October FOMC meeting. If this happens, the pressure associated with declining reserves in the US banking system will be reduced, which could provide relief to markets. This does not mean a return to asset purchases by the Fed, but it does signal that further tightening will not continue.

The third piece of the puzzle is ending the U.S. government shutdown. Sooner or later, it will happen – this time, it is not related to the debt limit, which was resolved in July, but affects the "freezing" of liquidity in the Treasury Account (TGA) held in FedOnce the shutdown ends, past-due and current payments will quickly exit the TGA account and go into bank reserves, which could reduce money market pressure and lower market interest rates relative to the Fed's official rate corridor.

If we add to this the possible end of QT, we have two important factors that could increase risk appetite – at least temporarily, for a month or two – easing the situation in the US repo market.

Hedge funds operate in this market, among other things, implementing a basis trade strategy—selling BTC futures contracts and buying BTC through ETFs, profiting on the difference. The lower the repo market rates, the greater the profitability of this transaction (funds use the repo market to build leverage), which can lead to larger purchases of ETFs and increased interest from retail investors—which, in turn, can trigger the FOMO effect.

If all these elements come into play at the same time by the end of the year and are not disrupted by further bankruptcies in the US or Trump's escalation of the trade war, they alone could push the price of Bitcoin to around $140-$150.