Many factors can influence the current and future value of Bitcoin. Finding reliable correlations is always a bit iffy. According to some, the current repo market problem in the US will spark a new Bitcoin bull run.
Financial markets are, for the most part, correlating with one another. Bitcoin and other cryptocurrencies are often considered to be outliers. In the real world, however, there appears to be some synchronicity as to how these markets move up and down on a weekly basis.
US Repo Markets Spark a Debate
As such, any potentially troublesome financial event can impact the Bitcoin price. Beforehand, it is never possible to tell if it will be a positive or negative effect.
In the case of the current US repo markets, things are not looking great. A lot of liquidity has been added to these markets by the Federal Reserve. While the bank is allowed to do so, it creates a very problematic outlook.
With the repo market liquidity going from $75bn to $120bn in quick succession, there can be a big issue ahead. The repo markets are pools of debts that need to be financed every single day. The larger the pool grows, the more difficult it becomes to sustain this model.
As is always the case with repurchase agreements like these, there are no guarantees. If the entity selling the government securities does not buy them back the next day, a cascading effect will ensure in quick succession.
If that were to happen, things could get interesting for Bitcoin. Its current market cap is slightly higher than the overall repo market pool in the US today. It would not take much to make Bitcoin seems like a potentially better alternative.
To this date, there is no indication that such a shift will occur in the near future.
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