• BTC could stall at the end of Q1 due to limited US liquidity. 
• The US debt ceiling debate could drive extra volatility in January. 

Bitcoin [BTC] and the overall crypto market could follow the 2024 trend and top out in March before entering an extended correction.

According to Arthur Hayes, Co-Founder of BitMEX and CIO at crypto VC Maelstrom, the local top in March will be driven by the Fed’s ongoing quantitative tightening (QT) alongside tax season in early April. 

Hayes added that both developments would be a net negative for US liquidity, stalling risk on assets like BTC. In his latest blog, he wrote, 

“My prediction is that the market peaks in mid to late March, so this equates to a removal of $180 billion worth of liquidity due to QT from January to March.” 

US debt ceiling risk

Another risk factor Hayes raised was the US debt ceiling, which currently stands at $31.5 trillion unless Congress raises it. The US Treasury could borrow again and drain extra market liquidity if revised upwards. He added, 

“Once default and shutdown are imminent, a last-minute deal will be reached, and the debt ceiling will be raised. At that point, the Treasury will be free to borrow on a net basis again and must refill the TGA. This will be dollar liquidity negative.” 

The US tax season from the 15th of April will further affect money supply, potentially stalking risk-on assets, noted Hayes.

Analysts at the crypto options trading desk, QCP Capital, echoed similar sentiment and warned that the US debt ceiling debate could drive market volatility.

In its latest Telegram broadcast, the firm stated,

“It won’t be smooth sailing into January, as structural risks loom. The U.S. Treasury debt ceiling reinstatement is projected to be reinstated mid-month, requiring the Treasury to adopt “extraordinary measures” to fund government expenditures. This could trigger market volatility as discussions around the issue intensify.” 

The above macro risk could dent January’s bullish outlook for BTC.

The cryptocurrency was back above $100K for the first time in two weeks, underscoring renewed optimism ahead of Donald Trump’s presidential inauguration on the 20th of January. 

That said, the risk almost aligned with a key top signal– Realized Profit/Loss using the 355-day moving average.

According to a pseudonymous on-chain analyst, Bitcoindata21, a metric was close to triggering a euphoria sell signal.