What is in the news these days is the Fed’s action to support the banking system that is severely in crisis, though this is only supporting Bitcoin.
The banking crisis with the failure of four major US banks, and others at risk. Has forced the Fed and the government to take unprecedented measures, and this indirectly brings new life to Bitcoin as well.
The Fed’s extraordinary measures
As also reported by Watcher Guru on Twitter with the following tweet:
“JUST IN: $2 trillion could be injected into the US banking system by the Federal Reserve’s emergency loan program, JPMorgan says.”
The Fed‘s emergency lending consists of the ability of distressed banks to access $2 trillion in liquidity at least, JPMorgan explains.
The aftermath of the collapse of the various Silicon Valley Bank, Silvergate, etc. has sunk the entire banking industry and fear is spreading like wildfire.
Many banks do not have their accounts in order and are not as solid as Silicon Valley Bank was, for example, although it also went bankrupt.
For the investment bank JPMorgan Chase & Co, the program put in place by the Fed and the US government is massive.
Available funds constitute the largest economic intervention ever put in place ($2 trillion) and are only meant to buffer the crisis with an injection of liquidity.
The plan has been under consideration well before the recent industry failures but now its rushed launch was necessary to avert the collapse of the US economy.
The operation will make it unnecessary to sell loss-making securities so banks can survive.
JPMorgan has stated that the Bank Term Funding Program will be sufficient to put the accounts of the entire banking system in order except for the 5 largest investment banks.
Whether or not to use the plan is in strong doubt since it would involve untying the state with a noose around its neck.
The amount allocated on balance is equal to the amount of total existing bank bonds.
For Nikolaos Panigirtzoglou’s strategy team:
“Utilization of the Fed’s Bank Term Funding Program is likely to be high.”
The largest US banks, along with those subject to intervention by the Fed and government, hold $3 trillion in bank reserves.
The Fed thinks about rates and Bitcoin benefits
There have been rumors for a few days now that the Fed no longer intends to raise rates by 50 basis points. There has even been talk of a rate standby.
This news, combined with the banking crisis, has led to, among other things. A drop in the yield on bots of 60 basis points in just one week.
The combination of the banking crisis and the idea of a rate standby is bringing a boost to Bitcoin. Which is up 20% in just four days.
Today Bitcoin stands at $24829 and is up 1.89% in the 24 hours.
Should Bitcoin succeed in breaking through $26.000 then the $30.000 target would be in its grasp.
Lack of confidence and losses by investors in the banking sector have brought liquidity to the crypto sector and especially to Bitcoin.
It is curious (I am being sarcastic) how the currency that was created to counter and give an alternative to the banking system as we know it appreciates in a phase of crisis in the latter.