As liquidity improves and U.S. monetary policy shifts to a more supportive stance following the record government shutdown, the stock and cryptocurrency markets may be preparing for a year-end reversal.
According to investment management firm ARK Invest, the improvement in market conditions will be driven by increased liquidity, with $70 billion returning to the market since the end of the U.S. government shutdown. As the Treasury's general account normalizes, an additional $300 billion is expected to return in the next five to six weeks.
Another potential catalyst will arrive on December 1, when the U.S. Federal Reserve plans to end its quantitative tightening program and shift to quantitative easing, a transition that involves purchasing bonds to lower borrowing costs and stimulate economic activity.
ARK wrote in a post on X on Wednesday, "With liquidity returning, the end of quantitative tightening (QT) on December 1, and a shift in monetary policy to a supportive stance, we believe the conditions for a market reversal of recent pullbacks are forming."
ARK Invest CEO and Chief Investment Officer Cathie Wood stated in a post on X on Thursday that the "liquidity tightening" currently limiting the upside potential in the cryptocurrency and artificial intelligence markets will "reverse in the coming weeks."
Earlier this April, ARK Invest predicted a price target of $1.5 million for Bitcoin (BTC) in its "bull case scenario" for 2030, and a price target of $300,000 in its "bear case scenario."
Despite recent adjustments in the cryptocurrency market, which have weakened Bitcoin's role as a safe-haven asset, the bullish price targets remain unchanged.
Wood explained in a webinar on Monday, "The accelerated development of stablecoins has taken away part of the role we expected Bitcoin to play," but "the appreciation of gold prices has far exceeded our expectations." She added:
Other popular cryptocurrency analysts also predict a significant rebound in the cryptocurrency market as U.S. financial conditions improve. Notably, BitMEX co-founder Arthur Hayes predicts that if the Fed announces a shift to quantitative easing, Bitcoin will rebound to $250,000.
Nevertheless, Iliya Kalchev, a scheduling analyst at digital asset platform Nexo, told Cointelegraph that the cryptocurrency market will continue to lack confidence until Bitcoin can recover the $92,000 level, which could "open the door for a broader recovery under consistent macro conditions."
Related: Tom Lee no longer stands by his $250,000 Bitcoin (BTC) prediction, as a year-end all-time high is now just "possible."
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