The crypto market is up today as the impact of the ongoing United States banking crisis plays out — the Federal Reserve has injected $300 billion into the economy.
Data from Cointelegraph Markets Pro and TradingView shows Bitcoin (BTC) up 7%, Ether (ETH) 4.5% and Binance Coin (BNB) 5.7% in 24 hours.
A broad rally in crypto markets means Bitcoin is back challenging the week’s highs, which also marked its best performance since June 2022. Can bulls sustain the momentum?
Nerves are palpable everywhere as the latest economic data shows the extent to which the Fed has gone to contain a banking crisis which some argue is unlike any other.
Amid warnings that more banks could fail in the coming weeks and contagion spreading to Europe, it appears that crypto is one of the few safe havens from the kind of turmoil reminiscent of the Global Financial Crisis (GFC) of 2008.
Cointelegraph takes a look at the major reasons why the crypto market is up today.
Fed liquidity pump boosts crypto amid claims QE is back
“It’s the liquidity, stupid!” popular markets commentator Holger Zschaepitz summarizes on the day as data showed the true extent of the Fed’s latest cash injections.
It’s the liquidity, stupid! This chart shows why stocks are rising in the midst of the banking crisis. Central banks are again pumping billions in liquidity into the market. The combined balance sheet of the 3 leading CenBanks rising again. pic.twitter.com/DX8MzlbRix
— Holger Zschaepitz (@Schuldensuehner) March 17, 2023
The combined implosion of Silicon Valley Bank (SVB) and Signature Bank has resulted in the Fed providing an emergency $297 billion — growing its balance sheet for the first time since it began to raise interest rates.
Its latest discount window borrowing has further seen banks take $150 billion, which makes for a new record even topping the 2008 GFC.
Unsurprisingly, reactions are heralding the end of quantitative tightening (QT) — the process of removing liquidity from the economy — and a return to its opposite, quantitative easing (QE).
Such a policy was enacted previously by the Fed after the GFC, as well as in March 2020 during the COVID-19 cross-market crash. The years that followed saw the U.S. M2 money supply grow 46% before QT began — and Bitcoin went from under $4,000 to nearly $70,000.
Quantitative Easing has started…
The Federal Reserve has added $0.3T (300 billion USD) in assets to its balance over the last week.
Last and only time they added a larger amount over a single week ($0.5T) was shortly after the COVID dip (March 2020) –> $BTC 15X’d within… https://t.co/WGSNYhkcsz pic.twitter.com/gHWM8ecCq2
— Gert van Lagen (@GertvanLagen) March 16, 2023
“Last week the Fed’s balance sheet swelled by $300 billion, wiping out 4 months of QT in one week,” gold bug Peter Schiff wrote in part of a Twitter reaction.
“By the end of the month the balance sheet could reach a new high. Rate hikes don’t matter. Inflation is headed much higher, thanks to bank bailouts.”
As Cointelegraph reported, crypto market performance was already sensitive to central bank liquidity trends — and not just in the U.S.
The more liquidity pumped into the global economy by central banks, the better, former BitMEX CEO Arthur Hayes claimed in February, with both the People’s Bank of China (PBoC) and Bank of Japan (BoJ) subsequently copying the trend this month.
In his latest blog post released on March 16, meanwhile, Hayes draws a striking contrast between March 2020 and this month’s Fed fund to rescue banks from the edge, the Bank Term Funding Program (BTFP).
“The Fed printed $4.189 trillion in response COVID. Right off the bat, the Fed implicitly printed $4.4 trillion with the implementation of BTFP,” he noted.
“During the COVID money printing episode, Bitcoin rallied from $3k to $69k. What will it do this time?”
Fed balance sheet chart. Source: Holger Zschaepitz/ Twitter
Bitcoin leads crypto to multi-month high retest
Bitcoin price volatility may still be rampant, but the message from crypto is increasingly clear — bulls are determined to ditch the past eighteen months’ downtrend.
Related: Bitcoin dominance nears 50% as research hails ‘bullish’ narrative flip
BTC/USD is trading at over $26,000 at the time of writing, eyeing up a retest of its nine-month highs from earlier in the week.
$BTC 25.5k now testing mid range of March 14th shooting star candle
— Cheds (Trading Quotes) (@BigCheds) March 17, 2023
The combined cryptocurrency market cap is attempting to do the same, up over 3% on the day to $1.098 trillion.
Total crypto market cap 1-week candle chart. Source: TradingView
Commenting on the latest events, popular trader Crypto Tony remained modest in his outlook amid a still-reactionary Bitcoin trading profile.
“Good to see some strength on Bitcoin this morning,” he acknowledged.
“Want to see this momentum sustain today to take out the highs. Holding $25,200 range high is now the bulls mission today.”
BTC/USD annotated chart. Source: Crypto Tony/ Twitter
Trader and analyst Josh Rager meanwhile eyed what could be a significant resistance/support flip for Bitcoin on weekly timeframes — fueling potential continuation. This comes in the form of the 200-week exponential moving average (EMA).
“Even with the lower time frames chopping around, the daily for BTC looks good and showing strength,” he tweeted on March 15.
“And if you zoom out, the weekly could close above the 200 EMA for the first time since June 2022.”
BTC/USD 1-week candle chart (Bitstamp) with 200EMA. Source: TradingView
At the same time, fellow trader and analyst Rekt Capital was hoping that Bitcoin might break out of a “macro downtrend” pattern in place since the $69,000 all-time high.
#BTC is right back at the Macro Downtrend resistance$BTC #Crypto #Bitcoin pic.twitter.com/T7GiQL8Hul
— Rekt Capital (@rektcapital) March 16, 2023
“A breakout past the BTC Macro Downtrend would confirm a new Bull Market and in turn confirm that November 2022 was the bottom,” he added.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.
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Author: William Suberg