QT End and the Rise of Bitcoin: Gold Cools Amidst Shifting Liquidity Dynamics

The Federal Reserve has dramatically reduced its liquidity buffer, shrinking it by a remarkable 95% to $348 billion from a peak of $2.3 trillion. This reduction, coupled with overall reserves at $2.99 trillion, signals a shift towards less interventionist monetary policy and a transition into a new liquidity regime. Experts anticipate that the Federal Reserve will begin tapering its balance sheet in the fourth quarter. analysis points to gold as cooling down amidst this change, potentially signaling the end of safe-haven status for the precious metal. Bitcoin, however, is expected to act as a catalyst for growth due to its high beta to equities and strong liquidity amplification capabilities. Reaching the $3 trillion threshold could trigger further market adjustments as central banks begin to withdraw liquidity. This is followed by a rotation sequence: gold profits are taken, followed by Bitcoin accumulating before equity markets follow suit. After the initial dip in Bitcoin prices, gold is expected to be repurchased post-dip, potentially pushing its price back towards $3,600. 450 billion dollars of liquidity unlocks signal the potential for a significant shift in asset allocation from safe-havens to risk assets. 78% of historical corrections have seen gold decline by 20-30%, indicating this could be an early indicator of a correction. The Fed’s unprecedented level of intervention has contributed to a $10 trillion surge in assets, but will ultimately not be able to sustain the high demand for liquidity forever, especially with over $38 trillion in debt and reserves at a historically-high $3 trillion level. 2023 could mark the beginning of a new liquidity regime.