A brand new study from Keyrock finds that not all newly created money impacts risk assets due to the way in which fresh liquidity flows through the economy.
According to a brand new report from crypto investment firm and market maker Keyrock, Treasury bill issuance is the important thing liquidity metric impacting the value of Bitcoin (BTC), somewhat than the balance sheet of the Federal Reserve or some other central bank.
Every 1% change in global liquidity levels impacts the value of BTC by 7.6% in the next fiscal quarter through which recent money is created. However, not all liquidity affects the costs of dangerous assets equally, said Keyrock researcher Amir Hajian.
According to the report, Treasury bill issuance has been about 80% correlated with BTC prices since 2021, and this metric leads BTC prices by about eight months. The writer wrote:
“When the Treasury increases Treasury bill issuance, it funds spending that flows into the actual economy and ultimately into dangerous assets like Bitcoin. When Treasury bill issuance declines or turns negative, these fiscal tailwinds fade.” The impact of the US Treasury issuing T-Bills on Bitcoin price in comparison with other methods of liquidity expansion. Source: Keyrock
“Historically, increasing net treasury bill issuance has a number one statistical relationship with Bitcoin returns,” the report continued.
Despite this high correlation, institutions and exchange-traded funds (ETFs) have dampened Bitcoin's sensitivity to liquidity conditions by around 23%.
The evaluation contradicts the favored theory that rate of interest policy set by the Federal Reserve is the predominant driver of liquidity impacting the costs of dangerous assets and predicts that global liquidity will impact BTC prices in late 2026 and early 2027.
The relationship between Treasury-led quantitative easing and the value of Bitcoin. Source: Keyrock
The looming wall of US debt maturity means more liquidity is coming
Global liquidity is at a “tipping point,” Keyrock's report said, adding that a big portion of $38 trillion in U.S. government debt is due over the following 4 years.
This means the U.S. Treasury may have to refinance the debt at higher rates of interest, much of which was financed at near-zero rates of interest.
The cycle of the T-Bill edition 2021-2028. Keyrock predicts Treasury bill issuance will begin this 12 months. Source: Keyrock
The U.S. is prone to step up Treasury bill issuance to roll over debt, the Keyrock analyst said.
“Treasury bill issuance is anticipated to succeed in and maintain $600 billion to $800 billion per 12 months through 2028,” the Keyrock report said.
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