Bitcoin: Can $17B Fed liquidity push BTC price above $65K?

Is “liquidity” the catalyst the market has been waiting for this cycle?

Technically speaking, this looks to be a crucial week for Bitcoin. BTC broke back above its 6-day downtrend with force last week, and the new week has begun with a further 1.7% increase. This has many analysts beginning to believe BTC could finally see a move above $65k this week, with this week’s close being a crucial level to watch. 

However, it will not be easy. As shown in the chart below, the BTC/XAU ratio has decreased 7.22% this month, wiping out most of the progress BTC made over July. Put simply, this means that investors have been rotating out of Bitcoin and back into gold, with risk appetite remaining firmly tied to the yellow metal.

Notably, this rotation is not limited to the spot market.

According to Token Terminal, tokenized commodity market cap growth over the last 30-days has clearly favored XAUT, with gold-backed stablecoins seeing an increase of $237.1 million and PAXG adding another $125.3 million. In other words, it appears investors are rotating into gold, both in the traditional and crypto spaces, with demand for tokenized gold outpacing demand for tokenized BTC.

This has resulted in a situation where a sizable amount of dry powder is currently located within the macro asset class. However, a move above $65k resistance this week won’t be that easy. Notably, this is where the Fed’s latest move could come at the perfect time, with the Fed set to inject $17 billion in liquidity that starts flowing into risk assets beginning next week. If this liquidity were to flow directly into Bitcoin, it would propel the price well above $65k.