Bitcoin Back Above $23,000 – Here’s What you Need to Know

Bitcoin and other cryptocurrencies have received a boost in value following the news that the Federal Reserve is injecting liquidity into the U.S. economy after Silicon Valley Bank failed and Signature Bank was closed.

Bitcoin, in particular, has seen a significant increase in value, with the BTC/USD pair rising by 15% from the two-month lows it had hit earlier in March.

This rise in value can be attributed to the events that have taken place in the U.S., which have provided at least temporary relief for bulls in the crypto market.

Silicon Valley Bank and Signature Bank are the latest victims of a trend of financial institution failures under the Federal Reserve’s rising interest rates. Despite Signature Bank being a major player in the cryptocurrency space, focusing on providing fiat on-ramps for crypto trading, the optimism in the crypto market remains high as fresh money is injected into the economy. This raises questions about whether this trend will continue and how it will impact the broader financial industry.

However, not everyone is convinced that this constitutes a pivot on interest rate hikes or overall policy by the Federal Reserve, and it remains to be seen how these developments will impact the future of the crypto market. As further news emerges and the dust settles, analysts will closely monitor the factors driving BTC price in the short term.

Fed takes measures on SVB

The recent news about Silicon Valley Bank (SVB) failing and the Federal Reserve stepping in to bail out depositors has sent shockwaves through the financial world.

The business was forced to take a staggering $1.8 billion loss due to investing consumer funds in mortgage-backed securities, which suffered in price thanks to the Fed raising interest rates. This caused a chain reaction as depositors tried to withdraw their money simultaneously, only to find that the funds were unavailable. This led to an emergency funding round that ultimately failed.

The Fed’s response to the crisis came in the form of the Bank Term Funding Program (BTFP), announced on March 12. This program will backstop depositors’ money, ensuring they have access to all their funds starting on March 13.

The Department of the Treasury, Fed Board, and Federal Deposit Insurance Corporation (FDIC) released a joint statement to confirm this, adding that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

The Fed’s decision to inject liquidity back into the economy through the BTFP significantly reverses its previous policy of withdrawing liquidity. This move effectively returns to quantitative easing (Q.E.), which is known to increase investor appetite for risk. As a result, risk assets rallied almost immediately after the announcement, with cryptocurrency being no exception.

However, some commentators have pointed out that the sudden closure of Signature Bank by U.S. authorities might have been an attempt to prevent crypto markets from capitalizing on the SVB aftermath. Despite being crypto-focused and a major on-ramp from fiat, Signature Bank’s closure did not dampen the optimism surrounding the Fed’s injection of fresh money into the economy.

As the dust continues to settle and more news emerges from the ongoing events, the impact on cryptocurrency markets remains to be seen. Nonetheless, the bullish surge in Bitcoin and other crypto assets following the Fed’s announcement suggests that investors remain optimistic about the future of cryptocurrency, despite the challenges posed by the current financial climate.

Fed interest rate pivot

As liquidity returns to the market, there is speculation about the fate of the Federal Reserve’s quantitative tightening (Q.T.) policy, which has been in place for the past 18 months.

Market swings between a 0.25% and 0.5% increase to the benchmark rate at the March 22 meeting of the Federal Open Market Committee (FOMC) were expected previously.

However, the stress in the banking system has led some to believe that there may not be an increase in interest rates. Goldman Sachs economist Jan Hatzius wrote that they no longer expect the FOMC to deliver a rate hike at its next meeting on March 22.

Michaël van de Poppe, founder and CEO of trading firm Eight noted that the coming week would produce another price catalyst in the form of February’s Consumer Price Index (CPI) inflation data.

Didn't trade over the weekend, but we can see continuation plays on #Bitcoin here.

'QE' and 'Bailout' for the banks, which means temporary relief + potential good CPI and no more rate hikes (or 25bps) is fuel.

Break above $21.3K is vital. Looking for longs there to $23.7K. pic.twitter.com/Zk2dUK04tD

— Michaël van de Poppe (@CryptoMichNL) March 13, 2023

David Ingles interpreted Goldman’s comments as considering CPI a “non-event.”

Just in the last hour: Goldman Sachs no longer sees the Fed raising interest rates next week due to the recent stresses in the banking sector.

Big call. Goldman economists have basically said tomorrow’s CPI print is a non event now. pic.twitter.com/ksTpK8ecNY

— David Ingles (@DavidInglesTV) March 13, 2023

However, Alasdair Macleod warned against assuming that the Fed had abandoned Q.T. for good, tweeting that “contracting bank credit forces up the price of loans, if you can get one. Monitor money markets!”

Initial market reaction to banking crisis is based on perceived Fed pivot. But this could be a mistake. Irrespective of Fed monetary policy, contracting bank credit forces up the price of loans, if you can get one.
Monitor money markets!

— Alasdair Macleod (@MacleodFinance) March 13, 2023

CME Group’s FedWatch Tool still shows that overall expectations favored a further hike over a stagnating benchmark rate on March 22, although 0.5% was off the table.

Bitcoin is back above $22,000

On March 13, Bitcoin is bullish, trading at around $23,600 at the time of writing (ahead of the Wall Street open). It hit local highs of $23,700 according to data from CoinMarketCap, and its recovery from its March 10 lows of under $20,000 was attributed to the Fed liquidity announcement.

This recovery erased any trace of the SVB implosion. Despite volatility moving BTC/USD up and down before the open, targets among traders remained varied, with Michaël van de Poppe arguing that $21,300 must hold to facilitate a long trade, which could potentially reach $23,700. Popular commentator Bitcoin Archive summarized:

“Bitcoin recovered from the biggest U.S. bank collapse since 2008… in just 3 days.”

USDC has almost restored its dollar peg

Investors can breathe a sigh of relief this week as USDC, the second-largest stablecoin by market cap has nearly regained its U.S. dollar peg as BNY Mellon and a new banking partner take over from where Signature and SVB left off.

Coinbase confirmed that USDC conversions begin today and assured its clients that all their funds are safe and accessible despite the recent turbulence in the traditional banking sector.

Circle’s CEO, Jeremy Allaire, stated that trust, safety, and redeemability of all USDC in circulation are crucial even amidst bank contagion affecting crypto markets.

Author

Andrey Kunev

Reporter at CoinsPress

Andrey Kunev is a knowledgeable cryptocurrency content creator passionate about the crypto market. With extensive experience in market analysis and investment reporting, Andrey is a valuable asset to the CoinsPress team. As a frequent contributor, he offers insightful and comprehensive coverage of market trends, price fluctuations, and new advancements in cryptocurrency. Whether you're a seasoned investor or just getting started, Andrey's clear and concise writing offers a comprehensive look at the current state of the crypto market and its prospects. Stay up-to-date with CoinsPress's expert analysis and commentary on all things cryptocurrency.