Bitcoin and cryptocurrency markets are once again facing an extremely important week that depends not only on macro data but also on a brewing US banking crisis. Early last week, the odds of a 50 basis point hike by the Fed at the next FOMC meeting on March 22 soared, but the landscape has changed dramatically.
These events are crucial for Bitcoin and cryptocurrencies
This Monday at 8:00 AM (ET), the financial world will be watching for President Joe Biden’s speech on the U.S. banking crisis. The cryptocurrency industry would be of particular interest if the President of the United States uses cryptocurrencies as a scapegoat for bank failures. “I am committed to holding those responsible for this disaster fully accountable,” Biden said.
On the other hand, it will be crucial to watch whether Biden admits that SVB’s problems stem from the fact that he has deposited $91 billion in long-term securities such as US mortgage bonds and US Treasuries. Considered safe, it is now worth $15 billion less after the Federal Reserve sharply raised interest rates.
Doing so could indicate immediate implications for the Fed’s interest rate policy. Goldman Sachs economist Jan Hatzius had already said in a note on Sunday: “Given the strains in the banking system, we no longer expect the FOMC to propose an increase. The next meeting will be held on March 22.”
Just the last hour: Goldman Sachs no longer expects the Fed to rise next week due to recent tensions in the banking sector.
Great phone. Goldman Sachs economists have basically said that tomorrow’s CPI data is not an event right now. pic.twitter.com/ksTpK8ecNY
— David English (@DavidInglesTV) March 13, 2023
Overall, the Fed is in a tough spot: an uptick could raise fears of more financial sector defaults in the market, a failure to do so could send the wrong signal and boost risky assets, while the Fed’s 2% inflation target remains nowhere in sight.
According to the FedWatch tool, only 55% now expect a 25 basis point gain following the events of the past few days. 45% even predicted a pause, like Goldman Sachs. If this proves to be correct, it would be an extremely bullish catalyst for risk assets like bitcoin and cryptocurrencies.
In the meantime, it will be interesting to see if there are more bank runs at smaller banks that investors no longer trust. In this sense, a contagion effect on Bitcoin and crypto cannot be ruled out. Will First Republic Bank be next?
This is currently the center of the financial universe.
Will bank runs continue to spread? Does the chart show that this is a serious problem, right? https://t.co/QemgkCCwAv
– Jim Bianco biancoresearch.eth (@biancoresearch) March 13, 2023
Macro data this week
On Tuesday, March 14 at 8:30AM ET, the most important macro data point of the week will be released. The US Bureau of Labor Statistics releases final US inflation data for February.
In January, the US inflation rate increased by 6.4% year-on-year, higher than the expected 6.2%, and the increase was higher than expected. For February, experts expect a drop to 6.0%. If analysts’ expectations are confirmed, the cryptocurrency market is likely to continue to rally.
On the other hand, if the consumer price index is higher than expected, the dollar may find more support in the short term. It remains to be seen, though, whether this will have an impact on the price of bitcoin and risk assets. Goldman Sachs’ assessment actually suggests that tomorrow’s CPI report is essentially a null event because of the banking crisis.
The latest US Producer Price Index (PPI) for the last month of February will be released on Wednesday, March 15 at 8:30AM EST. Although the PPI is not as significant as the CPI, it is still worth looking at.
Forecasts show a monthly increase of 0.4%. Producer prices rose by 0.5 percentage points month-on-month in January. If the price rises as experts expect, the dollar could strengthen further, creating headwinds for the cryptocurrency market. If the producer price index is lower than expected, Bitcoin may rise further.
At press time, Bitcoin was trading at $22,284, up 8.2% over the past 24 hours.
Bitcoin price, 1-hour chart | Source: BTCUSD on TradingView.com
Wisconsin Bankers Association featured image, chart via TradingView.com
Source of information: Compiled by 0x Information from CRIPTOMONEDA.The copyright belongs to the author Brian, and shall not be reproduced without permission