These Events Will Be Crucial
Bitcoin and crypto markets are once again facing an extremely important week, which will be shaped not only by macro data, but also by the growing US banking crisis. Although at the beginning of last week the odds of a 50bp Fed rate hike at the next FOMC meeting on March 22nd were skyrocketing, the situation has changed dramatically.
These events will be crucial for Bitcoin and cryptocurrency
This Monday morning, at 8:00 am (EST), the financial world will be attentive to the speech by the President of the United States, Joe Biden, on the banking crisis in the United States. Of particular interest to the crypto industry will be whether the US president uses crypto as a scapegoat for collapsing banks. Biden said, “I am committed to fully holding those responsible for this mess accountable.”
On the other hand, it will be crucial to see whether Biden recognizes that the Silicon Valley Bank’s (SVB) problems stem from the fact that it has deposited $91 billion in deposits in long-term securities, such as mortgage bonds and US Treasuries, which are considered safe. , but are now worth $15 billion less after the Federal Reserve aggressively raised interest rates.
Doing so could signal direct implications for the Fed’s interest rate policy. Goldman Sachs economist Jan Hatzius already said in a Sunday note: “In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22.”
Last minute only: Goldman Sachs no longer sees the Fed raising interest rates next week due to recent stresses in the banking sector.
Big call. Goldman economists basically said that tomorrow’s CPI impression is not an event now. pic.twitter.com/ksTpK8ecNY
—David Ingles (@DavidInglesTV) March 13, 2023
Overall, the Fed is in a tough spot: a hike could spread fears in markets of more defaults in the financial sector, while a failure to hike could send the wrong signal and boost risky assets, while the 2% inflation target of the Fed is still a long way off.
After the events of the last few days, only 55% now expect a 25 basis point increase, according to the FedWatch tool. 45% even predict a break, as does Goldman. If this is true, it will be an extremely bullish catalyst for risky assets like Bitcoin and cryptocurrencies.
Meanwhile, it will also be interesting to see if there are more runs on smaller banks that investors no longer trust. In this sense, contagion effects for Bitcoin and cryptocurrencies cannot be ruled out. Could First Republic Bank be next?
This is the center of the financial universe right now.
Will the bank run continue to spread? Does the chart say it’s a serious concern? https://t.co/QemgkCCwAv
— Jim Bianco biancoresearch.eth (@biancoresearch) March 13, 2023
Macro data this week
On Tuesday, March 14 at 8:30 AM EST, the most important macro data for this week will be released. The US Bureau of Labor Statistics releases final US inflation data for the month of February.
In January, US inflation came in at 6.4% year-on-year, above the forecast of 6.2% and rising more than anticipated. For the month of February, experts expect a drop of 6.0%. If analysts’ expectations are confirmed, the crypto market is likely to continue its relief recovery.
If, on the other hand, consumer price indices are above estimates, the dollar should gain more space in the short term. Whether this will have an impact on the Bitcoin price and risky assets, however, remains to be seen. The Goldman Sachs assessment effectively says that tomorrow’s CPI report is essentially a non-event due to the banking crisis.
On Wednesday, March 15 at 8:30 am (EST), the latest US Producer Price Indices (PPI) for the prior month of February will be released. While PPI is nowhere near as significant as CPI, it’s still worth a look.
Forecasts show a month-on-month increase of 0.4 percent. Producer prices had already risen by 0.5 percentage points in the monthly comparison in January. If the price rises as expected by experts, the US dollar is likely to gain even more strength and thus could provide a headwind to the cryptocurrency market. If producer price indices are below estimates, Bitcoin is likely to rise further.
At press time, Bitcoin price was at $22,284, up 8.2% over the past 24 hours.
Wisconsin Bankers Association featured image, graphic from TradingView.com