12 days ago 3 min read

Next Wave Bailouts: Bitcoin And Precious Metals Soar Amid Fed Policy Shift Speculation

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Around 7:30 a.m. EDT, the cost of a single bitcoin soared beyond the $27,000 mark to a high of $27,025. Gold and silver, two examples of precious metals, increased in value against the dollar by 1.98% to 2.12% over the past day. A number of speculators believe the reason why some assets, such as PMs and cryptocurrencies, have recovered is because the U.S. central bank will now ease its monetary tightening policy, despite the fact that many market analysts are puzzled by this.

Following Silvergate Bank's Failure, 4 Major Banks Received Bailout Funds; The Federal Reserve's Easing Sparks A Rebound In Cryptocurrencies And PMs

Investors in the market saw four large bailouts last week from Silicon Valley Bank (SVB), Signature Bank (SBNY), Credit Suisse, and First Republic Bank to save depositors. Once a financial contagion spread throughout the US banking system as a result of the failure of Silvergate Bank, all four financial institutions were saved with billions of dollars. The bailouts have increased the value of precious metals and the cryptocurrency market, along with rumors that the Federal Reserve may cease hiking interest rates and perhaps consider cutting them. On Friday morning, the price of one bitcoin (BTC) surged to $27,025, and the currency is presently trading for $26,517 per coin.

BTC is up 6.9%, and ethereum (ETH), the second-most valuable cryptocurrency asset, is up 5% in the last day. On Friday, a troy ounce of.999 fine gold is worth $1,959 per unit, up 1.98%, while a troy ounce of fine silver is worth $22.13 per unit, up 2.12%. Graham Summers, an analyst with Phoenix Capital Research, claims that market participants think the Fed is "back to printing money" once more. The analyst pointed out that the American Federal Reserve has already reversed half of its quantitative tightening (QT) program. Summers stated that the Fed's response to the Covid-19 pandemic in just five days was comparable to more than two months of quantitative easing (QE). Said Summers:

"Technically speaking, bank loans accounted for the majority of this ($164 billion to be exact). This is not quite the same as quantitative easing because the banks will have to pay it back (QE). The important thing to remember is that the Fed is now producing money rather than reducing its balance sheet. In fact, $300+ billion in a single week, not just a tiny bit."

This week's Onchain Insights newsletter from Intotheblock.com (ITB) raises the possibility that the current rise in risk assets is related to monetary easing policy. Based to the ITB weekly, markets are increasingly betting on interest rate increases slowing down as liquidity rises. In line with market forecasts, the U.S. central bank will grow more dovish about interest rate increases, and some people believe this month's benchmark rate boost won't happen. Recent steps by the Fed, which only took five days, have fueled rumors that the money printer has been restarted. The ITB newsletter also cites a report claiming that JPMorgan claimed the Fed might infuse $2 trillion in liquidity following the establishment of the Bank Term Funding Program (BTFP).

ITB experts note what happened in 2020 and 2021 when "markets surged as capital abounded." The newsletter opines that a substantial chunk of 2022's losses resulted from QT and the Fed's monthly rate hikes. The markets are likely gaining momentum in anticipation of the "money printer" being back on the table, the ITB newsletter continues, even though it is unclear whether the liquidity injection from the BTFP would be as high as the $2T projected. In his analysis, Phoenix Capital Research analyst Summers further underlined that "this won't end well" and insisted that "the next cycle of bailouts/easing/reflating the financial system is coming."

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