Around 7:30 am ET, the price of bitcoin exploded past the $27,000 range to a high of $27,025 per unit. Precious metals, or PMs, such as gold and silver, also rose between 1.98% and 2.12% against the US dollar over the past day. While many market watchers are wondering why specific assets such as PM and cryptocurrencies have rebounded, some speculators suspect that it is because the US central bank will now relax its monetary tightening policy.
4 Major Banks Saved Following the Collapse of Silvergate Bank; Federal Reserve Easing Sparks Rebound in Cryptocurrencies and PMs
Last week, market investors witnessed four significant bailouts to save depositors 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 through the US banking system following the collapse of Silvergate Bank. The bailouts, combined with speculation that the Federal Reserve will stop raising the federal funds rate and may even cut it, fueled the values of precious metals and the crypto economy. The price of bitcoin (BTC) 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), rose 5% higher over the last day. A troy ounce of .999 fine gold is $1,959 per unit on Friday, up 1.98%, and an ounce of fine silver was up 2.12%, hitting $22.13 per unit. Market investors believe the Fed is “taking money back” again, according to Phoenix Capital Research analyst Graham Summers. The analyst noted that the US central bank has erased half of its quantitative easing (QT) so far. Summers mentioned that what the Fed did in just five days is 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. The banks will have to pay this 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’s printing money. And not a little, but $300+ billion in a single week.
Intotheblock.comThis week’s (ITB) Onchain Insights newsletter notes that monetary easing may be contributing to the recent spike in risk assets. “Markets are seeing increased odds of interest rates slowing as liquidity increases,” the ITB newsletter details. Market estimates suggest the US central bank will become cautious about interest rate hikes, and some suspect the benchmark rate will be skipped this month. The Fed’s recent actions, which lasted only five days, added to speculation that the money printer had been turned back on. The ITB newsletter as well refers to an article that says JPMorgan stated that 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, when “markets rallied while capital abounded.” The newsletter believes that a significant portion of the 2022 losses stemmed from QT and the Fed’s monthly rates. “While it remains to be seen whether the liquidity injection from the BTFP will be as large as the estimated $2T, markets are likely to be rallying in anticipation of the ‘money printer’ coming back to the table,” the ITB news release added. Phoenix Capital Research analyst Summers also insists that the “next round of bailouts/downsizing/reflanking the financial system is here” and further emphasized 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? Share your thoughts in the comments section below.
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