Was This The Bitcoin Bottom Signal? Fed Pivot not far away according to analyst
Markets are starting to price in an incoming Fed pivot as banking instability forces central banks to protect the financial system.
Analysis by CryptoQuant analyst Cristian Palusi suggests that the liquidity crunch now plaguing commercial banks could be a “long-awaited buy signal” for Bitcoin.
Banks Down, Bitcoin Up
In a mail published on Thursday, Palusci noted that the implied federal funds rates have shortened their time frame for when they think the central bank will first cut rates again, from Q1 2024 to June 2023.
Meanwhile, gold and Bitcoin are on the rise: the precious metal rose to nearly $2,000 as of Friday, while it is often considered digital successor rose to a new 9-month high of $27,000.
“One of the items that represented a clear buy signal emerged immediately after the bankruptcy and related bailout of Silicon Valley Bank: the Coinbase premium,” Palusci wrote. Coinbase (COIN) has risen over 37% over the past 5 days and is known to be closely correlated with the crypto asset market that it enables trading.
“Initially the spread could have had a dual interpretation following the depegging of the USDC, in light of the recent price action it is clear that the premium instead indicated the huge buying pressure on the stock market due to the fact that US investors considered the $20K area a very interesting level, he continued.
The pivot is coming
Silicon Valley Bank (SVB) was home to $3.3 billion in Circle’s USDC reserves, which Coinbase is largely affiliated with. When the bank was shut down by regulators on March 10, USDC briefly lost its peg to the dollar, collapsing with both COIN and Bitcoin.
Now all three have recovered spectacularly after the Federal Reserve promised to rescue depositors of both SVB and Signature. The central bank also launched a special loan program for federally insured depository institutions, which has already been used by banks to borrow 300 billion dollars within a week.
On Thursday, BitMEX founder Arthur Hayes called program a roundabout form of quantitative easing that would eventually pump up Bitcoin – a sentiment Palusci agreed with:
Investment bank JP Morgan stated that the Fed’s Bank Term Funding Program (BTFP) will inject $2 trillion into the financial system,” he noted, “and with a similar acronym, the invitation to buy the dip seems quite explicit.”
Leverage in the cryptosphere also appears to be down compared to October 2022 levels, which “may represent additional elements to drive the recovery as central banks formalize the pivot.”
