Around 7:30 a.m. ET, the bitcoin price spiked past the $27,000 range to a high of $27,025 per unit. Precious metals, or PM, such as gold and silver, were also up 1.98-2.12% against the US dollar over the past day. While many market watchers wonder why specific assets like PM and cryptocurrencies have rallied, several speculators suspect that it is because the US central bank will now loosen its tightening policy.
4 big banks rescued after the collapse of Silvergate Bank; Fed Easing Sparks Rally in Crypto and PM
Last week, market investors witnessed four major bailouts to save depositors coming from Silicon Valley Bank (SVB), Signature Bank (SBNY), Credit Suisse and First Republic Bank. The four financial institutions were bailed out with billions of dollars after financial contagion spread throughout the US banking system following the fall of Silvergate Bank. The bailouts, combined with speculation that the Federal Reserve will stop raising the federal funds rate and may even lower it, have boosted precious metal values and the cryptocurrency economy. The price of Bitcoin (BTC) It rose to $27,025 on Friday morning and the asset is currently changing hands for $26,517 per coin.
BTC is up 6.9%, and the second leading cryptocurrency asset, Ethereum (ETH), has risen a further 5% over the past day. One troy ounce of .999 fine gold is $1,959 per unit on Friday, it is up 1.98%, and an ounce of fine silver is up 2.12%, to $22.13 a unit. Market investors believe the Fed is “reprinting money” again, according to Graham Summers, an analyst at Phoenix Capital Research. the analyst noted that the US central bank has erased half of its quantitative tightening (QT) so far. Summers mentioned that what the Fed did in just five days was equivalent to more than two months of quantitative easing (QE) during the Covid-19 pandemic. Summers stated:
Now technically a lot of this ($164 billion to be exact) came in the form of loans to banks. Banks will have to pay this back, so it’s not exactly the same as QE. Anyway, the key point is that the Federal Reserve is no longer shrinking its balance sheet… instead, it is printing money. And not a little, but more than $300 billion in a single week.
intotheblock.comThis week’s Onchain Insights bulletin (ITB) notes that monetary easing may be contributing to the recent rise in risky assets. “Markets are seeing greater chances that interest rate rises will slow down while liquidity increases,” details the ITB bulletin. Market estimates suggest the US central bank will turn dovish on interest rate hikes, with some suspecting the benchmark rate hike will be skipped this month. Recent Fed actions, which took just five days, have added to speculation that the money printer has been turned back on. The ITB newsletter also refers to an article which says that JPMorgan has stated that the Fed could inject $2 trillion in liquidity after the creation of the Bank Term Funding Program (BTFP).
The ITB researchers highlight what happened in 2020 and 2021 when “markets rallied as capital abounded.” The bulletin opines that a significant part of the 2022 losses stemmed from QT and the Fed’s monthly rate hikes. “While it remains to be seen whether the liquidity injection from the BTFP will be as large as the estimated $2 trillion, markets are likely to rally anticipating that the ‘money printer’ is back on the table,” adds the ITB bulletin. Summers, an analyst at Phoenix Capital Research, also insists that “the next round of bailouts/easing/reinflation of the financial system is here,” further emphasizing in his report that “this will not end well.”
What do you think the Fed’s monetary policy changes will mean for the future of precious metals and cryptocurrencies? Share your thoughts in the comments section below.
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