Home CryptoMarket Fed starts ‘stealth QE’ — 5 things to know in Bitcoin this week

Fed starts ‘stealth QE’ — 5 things to know in Bitcoin this week

by CryptoFan
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Bitcoin (BTC) starts the new week with a bullish surge above $22,000 as the US Federal Reserve injects liquidity into the US economy.

In a move that equates to a classic Bitcoin comeback, BTC/USD has risen a full 15% from the two-month low seen on March 10th.

The volatility, and temporary bull relief, is due to events in the US after the failure of one bank and the forced closure of another.

Silicon Valley Bank (SVB) and signatory banks have become the new victims in a brutal year for financial institutions under the Fed’s rate hikes – will the trend continue?

Despite the signing being crypto-focused and a major ramp from fiat currency, the crypto market has so far given no reason to give up optimism on the prospect of the Fed delivering new funding. I haven’t seen it.

Not everyone believes this will be a “pivot” for rate hikes or overall policy.

As the dust continues to settle and news pours in from ongoing events, Cointelegraph analyzes the key factors driving BTC’s price in the near term.

Fed bails out Silicon Valley bank depositors

The current topic, of course, is the impact of Silicon Valley Bank (SVB), which went bankrupt on March 10th.

The SVB, which swallowed hundreds of billions of dollars in deposits, was forced to lose a whopping $1.8 billion as it held consumer funds in mortgage-backed securities.

A snowball effect soon set in, as depositors became alarmed that something was wrong with their liquidity. All tried to pull out of his SVB en masse, but no funds were available, forcing them to sell their loss-making assets and make an emergency funding round that ultimately failed.

The result is that the Fed has stepped in to protect depositors’ money. March 12th, announced “Bank Term Funding Program” (BTFP).

“Depositors will have access to all funds from Monday 13 March.” statement Confirmed by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) from the Treasury Department.

“Losses related to the Silicon Valley Bank resolution will not be borne by taxpayers.”

As market commentators were quick to point out, this decision effectively marks a return to the Fed’s liquidity injection (quantitative easing (QE)), which previously had liquidity drawn from the US economy. rice field.

Risk assets quickly rebounded in the news as increased liquidity would ultimately increase investor appetite for risk.

Cryptocurrencies were no exception, despite US officials’ announcements. Some have argued that the abrupt closure of the undersigned banks is an attempt to directly stop the cryptocurrency market from capitalizing on the aftermath of the SVB.

“We are also announcing a similar systemic risk exception today for our signature bank in New York, NY, which was closed by the state charter agency. As with the Valley Bank resolution, taxpayers will not bear the losses,” the joint statement said.

Tedtalksmacro responding to the creation of popular commentator BTFP explained As a form of “stealth QE”.

“Unofficial Quantitative Easing starts Monday. Added.

“TL;DR The Fed’s balance sheet will grow and the U.S. dollar will become more liquid.”

As reported by Cointelegraph, cryptocurrencies as a whole are very sensitive to central bank liquidity trends, not just the United States.

This is emphasized by Arthur Hayes, former CEO of derivatives exchange BitMEX. In a blog post earlier this year, he explained how changing liquidity conditions affect the performance of Bitcoin and altcoins.

Now he was noticeably bullish.

“Get ready for a face-ripping rally of risky assets. Money printer go blah!!!” Said A Twitter follower about BTFP in one of several posts on March 12th.

Fed rate ‘pivot’ sparks speculation

Cryptocurrencies weren’t the only ones to question the fate of the Fed’s Quantitative Tightening (QT) policy over the past 18 months as liquidity returned to the market.

Speculation was rampant that day that this month’s decision to adjust interest rates could either lead to a cut or the Fed to keep rates unchanged.

Earlier, at the March 22nd meeting of the Federal Open Market Committee (FOMC), the market was swinging between 0.25% and 0.5% gains against the benchmark rate.

“Given the stress in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22,” Goldman Sachs economist Jan Hatzius wrote in a March 12 report. pointed out. quoted According to CNBC and others.

Bloomberg TV Chief Markets Editor David Ingles said: interpreted A comment that Goldman sees the consumer price index (CPI) as a “non-event.”

Cointelegraph contributor and founder and CEO of trading firm Eight, Michael van de Poppe, has announced another price catalyst next week in the form of February CPI inflation data. He pointed out that it would produce

“Banks’ ‘QE’ and ‘bailout’ mean temporary relief + potentially better CPI and a halt to further rate hikes (or 25bps),” he said. I have written As part of a Twitter comment on March 13th.

“The market is now waiting for the CPI to give the green light,” says popular trading and analytics account Daan Crypto Trades continuation.

“If the CPI rises, it will basically cause CPI to rise and the Fed to ease, so there will be turmoil. I do not think.”

Alasdair Macleod was more cautious, warning against assuming the Fed has completely abandoned QT in light of the BTFP decision.

“The market’s initial reaction to the banking crisis is based on the Fed’s perception of a turnaround. But this may be a mistake,” he said. murmured.

“Regardless of Fed monetary policy, shrinking bank credit will push up the price of loans if you can get them. Watch the money market!”

according to According to CME Group’s FedWatch Tool, overall expectations were still in favor of another rate hike rather than the March 22 benchmark rate stagnating. However, 0.5% were off the table.

Federal Reserve Target Interest Rate Probability Chart. Source: CME Group

BTC Price Jumps To $22.7K In A Fierce Rebound

As such, Bitcoin was clearly bullish during the March 13th Asian trading session.

Data from Cointelegraph Markets Pro and TradingView.

Much of the recovery from the sub-$20,000 low on March 10th came on the heels of the Fed’s liquidity announcement, which erased all traces of the SVB implosion.

BTC/USD 1 hour candlestick chart (Bitstamp).Source: Trading View

“Bitcoin has recovered from the biggest US banking collapse since 2008…in just 3 days,” popular commentator Bitcoin Archives wrap up.

Targets varied among traders as volatility pushed BTC/USD up and down before the trade even opened.

Van de Poppe argued that $21,300 should be held to facilitate long trades and could reach $23,700.

“22.7K liquidity looks ripe for grabs” Fellow Trader Crypto Chase continuation.

“For local longs, stops below 21K are safe IMO. If this keeps ripping, it doesn’t make much sense to me.”

Professional Trader Jackis I got it Last week’s low was exactly in line with the 0.618 Fibonacci retracement level from the 2023 high above $25,000.

“It is only natural that we are discontinuing our primary monthly support,” said Credible Crypto. Added About the current price movement in 4 timeframes.

Thus, Bitcoin’s weekly close exceeded $22,000, well above expectations. For Rekt Capital, the trader and analyst said this was “likely”, benefiting from a bearish double-top pattern previously unfolding on the weekly time frame.

“A week close above $21,770 is likely to invalidate a double top,” part of a March 12 tweet. read.

Nonetheless, further analysis indicated April as the closest point at which Bitcoin could begin to influence long-term trend changes.

“Big reaction in BTC from the range low of this macro range around $20,000”, Rekt Capital I have written.

“As long as $20000 holds, $BTC could challenge the macro downtrend again in the coming weeks, as early as April this year.”

BTC/USD annotated chart. Source: Rekt Capital/ Twitter

USDC looks to regain $1 peg

What could give investors a sigh of relief this week is the return of early cryptocurrency victims of the SVB implosion on March 13th.

USD Coin (USDC), the second largest stablecoin by market capitalization, has effectively regained its US dollar peg at the time of writing.

USDC is trading at $0.99 on Bitstamp after dropping 20%.

USDC/USD 1 hour candlestick chart (Bitstamp).Source: Trading View

on twitter thread On March 12th, CEO Jeremy Allaire confirmed that BNY Mellon and an unnamed new banking partner will pick up where Signature and SVB suddenly left off.

“The trust, security and 1:1 redemption of all USDCs in circulation are of paramount importance to the Circle, even in the face of the banking epidemic impacting the cryptocurrency market.” Added The press release praises the actions of the Federal Reserve and US lawmakers.

Coinbase, the largest exchange in the United States, Confirmed USDC conversion will start on March 13th.

“Despite the recent turmoil in the traditional banking sector, Coinbase continues to operate as normal. All client funds remain safe at Coinbase, including the USDC conversion which resumes on Monday. You can access it at,” he tweeted.

Other major stablecoins Stuck in step with USDCalso tried to regain the dollar peg with Dai (DAI) at $0.989 and USDD at $0.986.

As part of this, Changpeng Zhao, the CEO of Binance, the largest global exchange, announced that it would sell Binance USD (BUSD), part of its branded stablecoin to Bitcoin, Ether (ETH), and its own BNB. (BNB) has also been announced to convert. The existing “Industrial Revitalization Fund”.

“With nearly $1 billion untapped, this means the market will soon be under extreme buying pressure,” part of the reaction of on-chain data researcher The Data Nerd. read.

Sentiment recovers as risk of ‘short squeeze’ rises

Reflecting that crypto market sentiment remains highly sensitive to macro events, Cryptosphere & Greed Index On March 10, he returned to “Fear” for the first time in two months.

RELATED: See These 5 Cryptocurrencies for Potential Price Rebounds Next Week

The most recent event saw a dramatic turnaround, with Index scores going from 33/100 to 49/100 (classified as Neutral) in one day.

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

However, they remain bearish on derivatives exchanges. The weekend funding rate hit its lowest since the aftermath of his FTX collapse in November 2022, according to data from an on-chain analytics firm. glass node indicate.

“Longs are paid to be longs” Tedtalksmacro wrap up.

Bitcoin Futures Funding Rate Chart. Source: Glassnode

Excessively negative funding rates Ability to Induce a “Short Squeeze” – An event in which a large number of shorts are liquidated in a cascade-like domino effect as the majority of the market expects the price to continue to fall.

Crypto Liquidation Charts. Source: Coinglass

Croscript short liquidations have already totaled over $150 million on March 12th alone. according to The March 13 tally is $39 million, according to Coinglass data.

The views, thoughts and opinions expressed herein are those of the authors only and do not necessarily reflect or represent the views or opinions of Cointelegraph.