“The next bailout is here” – Bitcoin and precious metals surge amid speculation of Fed policy change –
Around 7:30 a.m. ET, the price shot up from Bitcoin above $27,000 to a high of $27,025 per unit. Precious metals, or PMs, such as gold and silver, are also up between 1.98% and 2.12% against the US dollar over the past day. While many market watchers are wondering why certain assets like PMs and cryptocurrencies rallied, some speculators suspect this is because the US Federal Reserve is now easing its monetary tightening policy.
Rescue of 4 major banks after Silvergate Bank collapse; Fading Federal Reserve sparks rally in cryptocurrencies and PMs
Last week, market investors witnessed four major bailouts to save depositors, stemming from Silicon Valley Bank (SVB), Signature Bank (SBNY), Credit Suisse and First Republic Bank. All four financial institutions were bailed out with billions of dollars after financial contagion spread to the US banking system following the fall of Silvergate Bank. The bailouts, combined with speculation that the Federal Reserve will stop raising and possibly even lower the federal funds rate, have fueled the value of precious metals and the cryptocurrency economy. Bitcoin (BTC) price surged to $27,025 on Friday morning and the asset is currently changing hands at $26,517 apiece.
BTC is up 6.9%, and the second largest cryptocurrency asset, Ethereum (ETH), is up 5% in the last day. An ounce of .999 fine gold was $1,959 per unit on Friday, up 1.98%, and an ounce of fine silver was up 2.12% to hit $22.13 per unit. According to Phoenix Capital Research analyst Graham Summers, market investors believe the Fed is printing money again. The analyst noted that the US Federal Reserve has lifted 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 explained:
Technically, much of that ($164 billion, to be precise) came in the form of loans to banks. That’s what the banks have to pay back, so it’s not quite the same as quantitative easing (QE). Regardless, the key point is that the Fed is no longer shrinking its balance sheet… instead it is printing money. And not a little, but over $300 billion in a single week.
Intotheblock.com (ITB) Onchain Insights newsletter this week notes that monetary easing may be contributing to the recent surge in risky assets. “Markets are seeing increased chances of rate hikes slowing while liquidity is increasing,” explains the ITB Newsletter. Market estimates suggest that the US Federal Reserve will become dovish about rate hikes and some suspect that the interest rate hike will be skipped this month. The Fed’s latest action, which took just five days to complete, has fueled speculation that the money printer has turned back on. ITB’s newsletter also references an article saying that JPMorgan has said the Fed could inject $2 trillion in liquidity after the creation of the Bank Term Funding Program (BTFP).
ITB researchers highlight what happened in 2020 and 2021 as “markets rallied as capital abounded”. The newsletter suggests that a significant portion of the losses in 2022 will be attributed to 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 rebound in anticipation of the ‘money printer’ returning to the table,” adds the ITB Newsletter. Phoenix Capital Research analyst Summers also insists the “next round of bailouts/easing/financial system reflation is here” and went on to stress in his report that “this is not going to end well”.
What do you think the Fed’s monetary policy changes will mean for the future of precious metals and cryptocurrencies? Do share your thoughts in the comment section below.
photo credit: Shutterstock, Pixabay, Wiki Commons, yampi / Shutterstock.com
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Source: Crypto News Deutsch
