In order to come to the rescue of the American banking sector, the Federal Reserve of the United States (FED) relaunched the printing press: nearly 300 billion dollars were borrowed in one week. The fundamentals of Bitcoin are only strengthened and the price of BTC has climbed 30% since the start of the week.
The FED relaunches the printing press
Earlier this week, the Federal Reserve (FED) of the United States announced a new rescue plan for the banking sector. To put it simply, understand that the printing press is open again. The first effects were not long in being felt: nearly $300 billion was borrowed from the US central bank between March 9 and March 15.
QE is Back!
About $300 billion in assets added to Fed balance sheet in the last week pic.twitter.com/a46TLAkFwr
— Genevieve Roch-Decter, CFA (@GRDecter) March 16, 2023
This surpasses the 4.6 billion of the previous week, but above all, the 111 billion printed following the 2008 crisis. These statistics show the magnitude of the “bankrun” which is currently shaking the United States, and the help provided by the FED to try to come to the rescue of the banking sector.
This rush was predictable and has its origins in recent events that have marked the American banking sector. Last week started off in total panic with the bankruptcy of Silicon Valley Bank (SVB), followed by that of Signature Bank. It ended in a widespread rout, dragging major European banking stocks down amid investor fears of a systemic crisis.
It won’t take long for that the FED decides to urgently extend its safety net, with the desire to cushion an inevitable fall of certain entities. Of the almost 300 billion dollars borrowed, 143 billion were for SVB and Signature. The money was mainly used to pay their uninsured depositors.
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To put it bluntly, these two banks had billions of dollars of US Treasury bonds at low interest rates. However, the FED’s policy of raising benchmark interest rates for more than a year has driven up long-term Treasury yields, but also decrease the value of bonds held by banks.
As a result, banks were unable to obtain sufficient liquidity through the sale of their Treasury bills. So they were in the impossibility of paying the many customers who were trying to withdraw their money from the banks. This phenomenon is called a bankrun.
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Bitcoin (BTC) takes advantage and climbs
What about the impact on the cryptocurrency market? Quite unexpectedly – but still explainable – the price of Bitcoin (BTC) benefited from this climate of concern for relaunch its bullish rally. At the time of writing these lines, he is again working the resistance of 25,000 dollars and could well cross it:
Evolution of the price of Bitcoin (BTC) on a daily scale
The famous “money printing” of the FED, much maligned, is also the one that artificially boosted risky markets, including that of cryptocurrencies, after the Covid crisis. Investors are aware of this and anticipate the situation to come by increasing their exposure to risky assets, directly benefiting Bitcoin.
Apart from the swept away risk of a USDC drop, this move is also explained by the belief of investors that Bitcoin could have a role to play in the financial crisis importance that awaits us, the one that Satoshi Nakamoto gave him.
Triggered in panic by political decision-makers, aware of being at the end of an exhausted financial system, this coming recession only strengthens the fundamentals of Bitcoin and the importance of holding a stateless currency. Will Bitcoin grow out of this first real financial crisis it is facing?
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Source: Trading View
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Journalist for Cryptoast, I strive to dissect every detail of the exciting world of cryptocurrencies and make it accessible and understandable to as many people as possible.
Lilian Aliaga
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