The price of bitcoin soared above the $27,000 level to a high of $27,025 per unit at around 7:30 AM EDT. Precious metals (PM) such as gold and silver also gained between 1.98% and 2.12% against the US dollar on the day. While many market participants wonder why certain assets such as PMs and cryptocurrencies have rebounded, many speculators believe it may be because the U.S. central bank will now ease its tight monetary policy.
Four major banks bailed out following the collapse of Silvergate Bank, and the Federal Reserve’s easing spurred a rebound in cryptocurrencies and PMs
Last week, market investors witnessed four significant bailouts for depositors, stemming from Silicon Valley Bank (SVB), Signature Bank (SBNY), Credit Suisse, and First Republic Bank. All four institutions received multi-billion dollar bailouts as financial instability spread throughout the U.S. banking system after the failure of Silvergate Bank. The bailouts, coupled with speculation that the Federal Reserve would cease and possibly lower the federal funds rate, fueled the value of precious metals and the cryptocurrency economy.18}The price of Bitcoin (BTC)rose to $27,025 on Friday morning, with the asset currently trading at $26,517.
BTCis up 6.9%, while the second largest cryptocurrency asset,Ethereum (ETH)rose 5% higher over the past day. The .999 fine gold troy ounce was up 1.98% at$1,959/ozon Friday, while the fine silver ounce rose 2.12% to hit $22.13/oz. According to Phoenix Capital Research analyst Graham Summers, market investors believe the Fed is “back to printing money” again. The analyst notedthat the U.S. central bank has written off half of the quantitative tightening (QT) it has been doing. Summers noted that what the Fed did in just five days was the equivalent of more than two months of quantitative easing (QE) during the Covid-19 pandemic. Summers stated.
Now, technically, the bulk of this ($164 billion to be exact) was in the form of loans to banks. This is a bit different from quantitative easing (QE) because the banks have to pay this back. Anyway, the point is that the Fed is no longer shrinking its balance sheet, it is printing money…. And not just a little, they are printing more than $300 billion of money in one week.
Intotheblock.com‘s (ITB) Onchain Insights newsletter this week, notes that monetary easing policy may have contributed to the “The market sees an increasing probability of a slowdown in interest rate hikes while liquidity increases,” the ITB newsletter detailed. Market expectations are that the U.S. central bank will be more dovish about raising interest rates and will not raise its benchmark rate this month. the Fed’s recent actions, in just five days, have led to speculation that the money printer has flipped the switch again. the ITB newsletter also, JP Morgan’s articlethat said the Fed could inject $2 trillion in liquidity after the creation of the Bank Term Funding Program (BTFP).
ITB researchers highlight what happened in 2020 and 2021, when “capital was abundant and markets were rising.” The newsletter opines that most of the losses in 2022 can be attributed to QT and the Fed’s monthly rate hikes; whether the BTFP liquidity injection will equal the estimated $20 billion remains to be seen, but the market is rising in anticipation of the “money printer” becoming available again It is likely to be,” the ITB Newsletter adds. Phoenix Capital Research analyst Summers also asserted that “the next round of bailout/relaxation/reinflating of the financial system has arrived,” and further stressed in the report that “this will not end well.”
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