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The Bitcoin and cryptocurrency markets are once again facing a critical week that will be impacted not just by macro data, but also by the looming American financial crisis. While the probability of a Fed rate rise of 50 basis points at the next FOMC meeting on March 22 was rising at the start of last week, the scenario has altered radically.
The financial world will be watching US President Joe Biden’s statement on the US banking issue this Monday morning at 8:00 a.m. (EST). The crypto sector will be particularly interested to see if the US President blames crypto for the bank failure. “I am dedicated to bringing those responsible for this mistake completely accountable,” Biden stated.
On the other hand, whether Biden acknowledges that Silicon Valley Bank’s (SVB) problems stem from the fact that it parked $91 billion in deposits in long-dated securities such as mortgage bonds and U.S. Treasuries that were deemed safe but are now worth $15 billion less after the Federal Reserve aggressively raised interest rates will be critical.
If he does, it may have an immediate impact on the Fed’s interest rate policies. In a Sunday note, Goldman Sachs economist Jan Hatzius stated, “In light of the stress in the financial sector, we no longer expect the FOMC to deliver a rate rise at its next meeting on March 22.”
In summary, the Fed is in a difficult position: a rise might spread anxiety in the markets of further banking sector bankruptcies, while a no-hike could send the incorrect signal and pump up risk assets, while the Fed’s 2% inflation objective remains a long way off.
According to the FedWatch Tool, just 55% currently predict a 25 basis point raise in the light of recent developments. Goldman is among the 45% who foresee a halt. If this is confirmed, it will be an extraordinarily positive trigger for risk assets such as Bitcoin and cryptocurrency.
In the meanwhile, it will be fascinating to observe whether there are any further bank runs on smaller banks that investors no longer trust. In its aid rally.
If, on the other hand, consumer price indices are higher than expected, the US dollar is likely to gain momentum in the short term. It remains to be seen whether this will have an influence on the Bitcoin price and risk assets. According to Goldman Sachs, tomorrow’s CPI data is practically a non-event owing to the financial crisis.
The newest U.S. Producer Price Indices (PPI) for the previous month of February will be released on Wednesday, March 15 at 8:30 a.m. (EST). Although the PPI is not as significant as the CPI, it is worth investigating.
Predictions predict a 0.4 percent gain month over month. In January, producer prices had already risen by 0.5 percentage point month on month. If the price rises as predicted by analysts, the US dollar is likely to strengthen more, creating a headwind for the crypto market. If producer pricing indices fall short of expectations, Bitcoin is likely to rise higher.
At the time of publication, the Bitcoin price was $22,284, up 8.2% in the previous 24 hours.
