Cryptocurrency analytics firm MarktQuant has identified a clear pattern between Federal Reserve Reverse Repo (RRP) hikes and subsequent Bitcoin price declines.
The firm recently explained that after each quarterly Fed RRP hike, Bitcoin experiences a significant drop, typically reaching its full effect approximately 18.2 days later.
According to MarktQuant, these Fed liquidity tightening measures appear to directly affect Bitcoin’s price action. Data shows that declines have an average lag of 18.2 days with a standard deviation of 7.7 days, giving traders the opportunity to speculate and adjust their positions.
“FED RRP increases consistently lead to BTC declines,” the statement said. “Volume increases during these periods confirm that selling pressure is increasing.”
The Reverse Repo Program allows financial institutions to deposit their excess reserves with the Fed in exchange for collateral, effectively reducing liquidity in the financial system. As this tightening of liquidity occurs, it is likely to be reflected in the cryptocurrency market, with Bitcoin being particularly affected.
MarktQuant highlighted the importance of monitoring the Fed’s RRP moves, suggesting that by understanding this predictable lag time between the liquidity tightening and Bitcoin’s response, investors can make more informed decisions regarding risk management and portfolio adjustments.
*This is not investment advice.
