Bitcoin Bulls Gain Strength, But Is The Fed Really Forced To Pivot?

According to a tweet today by Arthur Hayes, co-founder of BitMEX, bitcoin and the wider crypto market ready for a new bull run in the face of a looming banking crisis. But there are some question marks behind this statement.

Will the Fed make an early reversal despite inflation still rising? Has the Fed really started the money printing machine again to save the Silicon Valley Bank (SVB) by launching quantitative easing (QE)? At the moment, there is an extremely large amount of speculation about this, but the answer is far from clear.

Will the Fed Pivot and Bitcoin Rise?

US Federal Reserve Chairman Jerome Powell has repeatedly stressed in recent months that he will keep raising interest rates until inflation returns to 2% or something breaks. And that moment may have come, as analyst Dylan Leclerc explains in his latest tweet, referring to federal funds futures, among other things.

Treasury Secretary Janet Yellen admitted in an interview with CBS that SVB’s collapse was not caused by the crypto or technology industry at its core. She admitted that the SVB’s problem was buying government bonds.

Problems with this bank [SVB]from the communication of his situation suggest that because we are in a higher interest rate environment, the assets he owns, many of which are Treasury assets or mortgage-backed securities that are government-guaranteed, are losing market value, and problems technology sector is not at the heart of this bank’s problems.

And Powell should be equally aware of this. “The Fed, buying low-price bonds at par, just admitted that the entire US banking sector has an asset-liability mismatch, and this is 100% due to loose and then tight monetary policy. Powell doesn’t want that,” Hayes said. explained recently.

Something broke?

And the first cracks in the Fed’s quantitative tightening (QT) cycle are inevitable. As part of its new bank term financing program, the Fed is bailing out all lost deposits at closed banks such as Silicon Valley Bank and Signature Bank. Even though the Fed is only replacing existing money, the signaling effect is clear.

The Fed has raised interest rates so fast that something in the financial system is broken and ready to back out. This is the opinion of the popular analyst “tedtalksmacro”, who wrote today: “Unofficial QE starts on Monday. It’s so bullish [for Bitcoin]”.

But what’s the point? Will the Fed stop raising rates entirely? Hollenhorst Citi believes that before the Fed took action, it was unlikely that recent bank failures were systemic, and now that possibility is even less likely.

“We believe that the terminal rate is likely to reach at least 5.5-5.75% and remain at this level for some time. A rate hike of 50 basis points is still possible,” Hellenhorst concluded.

disagreement is Goldman Sachs, which no longer expects a Fed rate hike next week due to concerns over the banking system and forecasts that the Fed will put a hold on rate hikes in March before raising rates by 25 basis points in April, May and June.

Traders seem to agree more with Gold Sachs as two-year US bond yields posted one of the biggest three-day drops in history. As Bloomberg journalist Lisa Abramovich noted, it is surprising how much traders lowered their expectations regarding the Fed’s final discount rate.

They now expect the Fed to raise rates just one more time before cutting them later this year. The implied peak fell from an expected 5.7% on Thursday to 4.8%.

At press time, Bitcoin was trading at $22,609, up 9.8% in the last 24 hours.

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Bitcoin price, 4-hour chart | Source: BTCUSD on
Featured image by Bloomberg, chart by

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