As the US Federal Reserve’s Bank Term Funding Program (BTFP) approaches its conclusion on March 11, 2024, the Bitcoin and crypto market stands at a important juncture. Instituted in March 2023 within the aftermath of the sudden collapses of (*5*) and Silicon Valley Bank, the biggest for the reason that 2008 monetary disaster, the BTFP has been a lifeline for US banks, providing loans in opposition to high-quality collateral to make sure liquidity in turbulent instances.
The BTFP’s Closure And Its Implications For Bitcoin
The BTFP’s conclusion might ship ripples via the monetary sector, affecting banks’ liquidity and probably resulting in tighter lending practices. Crypto analyst Furkan Yildirim not too long ago detailed on X, “With the BTFP’s end, banks may face liquidity constraints impacting their operations and profit margins. This could slow down economic growth due to reduced lending.”
However, he added that “the Fed might counter this by adopting a more lenient monetary policy, which could stabilize asset prices and prove beneficial for Bitcoin and the broader market.”
Arthur Hayes, the visionary behind BitMEX, supplied a similar opinion in certainly one of his newest essays. He identifies a trio of macroeconomic indicators – the Reverse Repo Program (RRP), the BTFP, and the upcoming March interest-rate resolution – as pivotal to the Bitcoin and crypto market.
Hayes predicts a extreme market correction ought to liquidity sources, together with the BTFP, dry up. “The market could face a harsh reality check without new dollar liquidity injections,” he suggests, indicating a probably tough transition interval for all asset courses, together with cryptocurrencies.
The BitMEX founder anticipates a tumultuous March, with the opportunity of a 30-40% correction in Bitcoin costs triggered by the BTFP’s expiry. Yet, he stays optimistic about a potential rebound forward of the Federal Reserve’s assembly on March 20, hypothesizing that anticipatory actions by the Fed, comparable to fee cuts, might reinvigorate the market.
“This critical period could define the near-term liquidity scenario, offering a rebound opportunity for Bitcoin before further assessing the impact of the Fed’s decisions on market dynamics,” he explains.
More Expert Opinions
Balaji Srinivasan, former CTO of Coinbase, not too long ago additionally offered a strategic viewpoint on the synchronicity of extra key occasions, “BTFP expires in March. BTC halves in April. RRP runs out in May. All around the same time. So, the US banking system gets stressed right as Bitcoin gets scarce.” His evaluation underscores the coincidental timing of the BTFP’s conclusion with Bitcoin’s halving occasion, suggesting a novel set of circumstances that would amplify market reactions.
Ansel Lindner, host of BTC Markets, supplied a commentary amidst rising issues over regional banking stability. Following revelations of “material weakness” in New York Community Bank’s (NYCB) mortgage threat monitoring and a major enhance in its mortgage loss reserves earlier this month, Lindner pointed to potential early indicators of one other banking sector stress.
“It’s starting… Remember what happened to Bitcoin during last March’s banking crisis? The BTFP was created on 12 March 2023, Bitcoin rallied 40% within 2 weeks. #SafeHaven,” Lindner said, highlighting the potential for Bitcoin if the US Fed decides to intertwine once more.
In conclusion, the Bitcoin and crypto markets are at a crossroads on March 11, with potential outcomes starting from vital downturns to bullish recoveries, contingent on the Federal Reserve’s actions and broader macroeconomic developments. The finish of the BTFP signifies extra than simply the cessation of a brief liquidity program; it represents a second of reality for the banking sector’s resilience and the crypto market’s response to shifting financial tides.
At press time, BTC traded at $67,005.
Featured picture created with DALL·E, chart from TradingView.com
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