Over the past 24 hours, the bitcoin price has surged into the $27,000 range, recording an intraday high of $27,811. During the same period, precious metals such as gold and silver also rose from 1.98% to 2.12% against the US dollar. While many market watchers wondered why certain assets, such as precious metals and cryptocurrencies, rallied, some speculators suspected it was due to major loose monetary tightening by the U.S. central bank.
4 big banks rescued after collapse Silvergate Bank – Is the Fed about to “U-turn”?
Last week, market investors saw four major bailouts by Silicon Valley Bank (SVB), Signature Bank (SBNY), Credit Suisse and First Republic Bank to rescue savers. All of these financial institutions have received billions of dollars in bailouts since the collapse of Silvergate Bank as the financial crisis spread throughout the US banking system. The bailout combined with speculation that the Federal Reserve (Fed) will stop raising the federal funds rate or even cut it has boosted the value of the precious metal and the crypto economy. BTC price rallied above $27,800 and is currently trading at $27,243.
Bitcoin price 4-hour chart | Source: Tradingview
BTC is up 5%, and ETH, the second-largest cryptocurrency, is also up more than 6% over the past day. On Friday, a troy 0.999 net gold was at $1,959 a unit, up 1.98%, while an ounce of silver rose 2.12% to $22.13 a unit.
Phoenix Capital Research analyst Graham Summers said market investors believe the Fed will resume printing money. The analyst noted that, so far, the US central bank has canceled half of its quantitative tightening (QT) scale. According to Summers, what the Fed has done in just 5 days is equivalent to more than 2 months of quantitative easing (QE) during the Covid-19 pandemic.
“Now, technically, most of that — $164 billion to be exact — is from bank loans. The banks will have to repay that, so it’s not exactly the same as quantitative easing (QE). Anyway, the bottom line It’s the Fed that’s not shrinking its balance sheet…it’s printing money. Not a little bit, but over $300 billion a week.”
This week’s Intotheblock.com (ITB) Onchain Insights newsletter notes that monetary easing may be one of the reasons behind the recent surge in risky asset prices.
“Markets are seeing a slowdown in rate hikes, while liquidity has increased,” the ITB press release detailed.
The market predicts that the Fed’s interest rate hike stance will turn dovish, and doubts about raising interest rates will disappear this month. The latest five-day action by the Federal Reserve has added to speculation that the money printing presses are starting up again. The ITB announcement also referred to an article in which JPMorgan claimed that the Fed could inject $2 trillion in liquidity once the Bank Term Funding Program (BTFP) was established.
Meanwhile, the ITB researchers highlight what is happening in 2020 and 2021 as a “recovery of the market due to a well-capitalized market”. The report suggests that a large part of the 2022 losses stems from the Fed’s quantitative tightening and monthly rate hikes.
“While it remains to be seen whether the liquidity injected by BTFP will reach the estimated $2 trillion, the market may recover in anticipation of the money printing presses returning to work.”
Summers, an analyst at Phoenix Capital Research, also stressed that “the next round of financial system bailout/accommodation/inflation is here,” adding in his note that “it’s not going to end well.”
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