BTC Reaches $27K As Fed Provides $300B Of New Liquidity

March 17, 2023 9:10 pm Comments

Bitcoin has been continuing its recent bull rally and has finally reached the $27k milestone which is the highest that it has been in the past 9 months.

The bull rally comes during a time when multiple banks have collapsed which has shattered a lot of confidence that depositors had in financial institutions.

A reason for why there is an ongoing crypto rally may be because of the actions of the Federal Reserve recently where they have injected around $300 billion into the economy in an effort to help resolve the banking crisis.

However, many are concerned about this because it ultimately may undo a lot of the work that the Fed was doing in order to combat inflation.

Essentially, a complete 180 has been done where quantitative easing has been done this week which reverse the quantitative tightening agenda that the Fed had earlier.

CoinTelegraph reports:

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting $27,025 on Bitstamp before consolidating.

At the time of writing, the pair circled $26,500 with volatility ongoing after the Wall Street open.

A catalyst for fresh upside had come in the form of the Federal Reserve’s balance sheet data overnight, this showing almost $300 billion being injected into the economy as part of the banking crisis response.

The event effectively undid months of liquidity removal under the Fed’s quantitative tightening (QT), and commentators were quick to call the restarting of the opposite phenomenon — quantitative easing (QE).

“They’ll tell you it’s not QE, but the numbers don’t lie. Roughly half of the reduction from a year of quantitative tightening has been erased in a week,” trader, analyst and podcast host Scott Melker, known as “The Wolf Of All Streets,” commented.

As a result of the quantitative easing and the new supply of money being injected into the economy, there is no telling if inflation will return.

Bitcoin continuing to rally during a time like this makes sense as the digital asset itself will always have a limited supply.

It is unclear what the rest of the traditional financial markets will react as a result of the Federal Reserve’s actions, but it is clear that crypto is now a very appealing option to include for many investment portfolios.

Therefore, many expect new capital to enter the crypto markets as uncertainty towards the banking system and inflation continue to persist.

BeInCrypto concludes:

In total, the U.S. central bank has assisted the banking system with nearly half the amount that it did during the 2008 crisis. Michael Feroli, a JPMorgan economist, believes it is a big number.

He says, “The glass half-empty view is that banks need a lot of money. The glass half-full take is that the system is working as intended.”

Nikolaos Panigirtzoglou, a JPMorgan strategist, estimates that the Fed might inject $2 trillion into the US Banking system and reverse the impact of the QT. Gaurav Dahake, the Chief Executive Officer of Bitbns, told BeInCrypto, “Over time, it pushes Bitcoin over $50,000, and Bitcoin halving is about a year away now.”

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