With half of US banks reportedly on the brink of bankruptcy, today’s decision by the Federal Reserve on whether to raise or lower ierest rates could be the most importa eve of the year in determining Bitcoin’s price trend.
According to NewsBTC, in March, the Federal Reserve increased the ierest rate by 0.25 perceage pois. This increase at that time would pave the way for the future decisions of the American ceral banks. Jerome Powell, the bank’s preside, also clarified that although there is a possibility of further ierest rate hikes, the decision will depend on the data.
The possibility of an increase of 0.25 perceage pois in the ierest rate despite the opposition
While the consumer price index rose 5% year-on-year in March (the smallest increase in nearly 2 years), core inflation has proven to be very sticky. However, the market expects today’s 0.25 perceage poi increase in ierest rates to be the last upward trend in this cycle.
According to FedWatch data, 86% of market participas believe the Federal Reserve will raise ierest rates today, despite strong opposition from US policymakers yesterday. Members of Congress, led by Democrats, called on the Federal Reserve to stop raising ierest rates.
On Monday, 10 senators and represeatives, led by Elizabeth Warren, wrote a letter to Federal Reserve Chairman Jerome Powell expressing concern about their curre monetary policy and calling for a recession that would hurt jobs and small businesses. .
On Monday, 10 senators and represeatives, led by Elizabeth Warren, wrote a letter to Federal Reserve Chairman Jerome Powell expressing concern about their curre monetary policy and calling for a recession that would hurt jobs and small businesses. .
Oppones of the curre aggressive policies argue that the fastest cycle of ierest rate hikes in the Fed’s history has created deep cracks in the US banking system. After the collapse of Silicon Valley banks, Signature Bank and First Republic Bank, many other US banks are now at risk of bankruptcy.
In addition, the rece collapse of First Republic Bank exacerbates the credit crunch: a decline in bank lending due to shrinking bank deposits. According to an AP report yesterday, half of the 4,800 US banks’ assets are worth less than their liabilities.
Professor Amit Seru, a banking expert at Stanford University, said:
The fact that thousands of banks are under so much pressure is scary. Let’s not pretend that this is only about Silicon Valley Bank and First Republic. A large part of the US banking system is poteially on the brink of bankruptcy.
As a result, according to the Fedwatch report, the market believes that the trend of increasing ierest rates will not only stop after today’s meeting, but will also be reduced twice this year. This prediction is corary to the opinion of the Federal Reserve, which in its latest report predicts a 5% ierest rate for the year 2023.
How will the price of Bitcoin react?
The 0.25 perceage poi increase in ierest rates seems to have already had its effect on market prices and is not expected to affect the price of Bitcoin. As a result, when the ierest rate is announced at 21:30 Tehran time, you should not expect much price fluctuation. It is unlikely that the Fed will decide on an early ierest rate freeze, the only decision that could have much impact on the market.
For this reason, all eyes will be on Powell’s press conference at 23:00 tonight Tehran time. Perhaps the most importa part of Powell’s remarks will be whether the Federal Reserve will stop raising ierest rates in June. In this case, the price of Bitcoin is expected to show an immediate upward reaction. If Powell commes to the corary or states that decision-making depends on the data, the market will likely be bearish.
Another importa issue for Bitcoin will be ierest rate cuts later this year. Especially if Powell insists that the Fed will keep ierest rates high uil 2024, it could have a negative impact on the price of Bitcoin. But now the question is whether Pavel is wrong or the market and who will admit their mistake first.
Powell’s remarks on the US banking crisis and expectations of a soft landing (recession) will be another importa part of his remarks today. Both of these issues have the poteial to change the price of Bitcoin.
Meanwhile, traders should watch out for early price action and fake breakouts. Cryptocurrency analyst Ted (tedtalksmacro) explained that hedging trades are usually opened shortly after ierest rate announcemes. When these positions are opened, a small swing will occur, and after the positions are redeemed, the real moveme begins. That is why the price fluctuates again after that.
Finally, as the open short positions are closed, the cash market takes corol of the actual moveme. Ted advised:
In this situation, you should follow the cumulative volume delta (CVD) of the spot market and check whether it is differe from the trend of the regular coracts or not… After the press conference, we can measure things more clearly; Because hedging transactions are opened.
