Dollar liquidity to support banking sector helps Bitcoin rally
Source: Bitcoin BTC
- Morgan Stanley analysts believe Bitcoin is the best beneficiary of the Fed’s cash injection into distressed banks.
- Bitcoin is on track to breach the $30,000 price target, and related macroeconomic moves could aid growth.
Central banks cannot sit idly by and do nothing when the banking industry beneath them implodes. This fact applies even to the US central bank, and the actions of these central banks are especially a boon for the price of Bitcoin (BTC) and by extension the majority of altcoins around today.
As reported by Coindesk, citing data from Morgan Stanley analysts, Bitcoin has surged in recent days on expectations of increased cash liquidity that the Feds will inject to bail out the country’s distressed banks.
Earlier this month, Wall Street saw a disastrous ripple effect among three major banks, including Silvergate Bank, Signature Bank and finally Silicon Valley Bank. The collapse of these three financial institutions was considered the biggest banking implosion since the Great Financial Crisis of 2008.
As a Federal Deposit Insurance Corporation (FDIC) regulated bank, the regulator, supported by the duo of the Treasury Department and the Federal Reserve, launched a Federal Emergency Fund called the Bank Term Funding Program (BTFP) to help ease the burden on the collapsed banks per its deposit customers.
This move flushes the economy with excess cash flow which first devalues and further makes risk assets like Bitcoin relatively more attractive. In all of this, Morgan Stanley analysts believe Bitcoin has benefited overall.
“Liquidity in Bitcoin’s trading order book is at its lowest level in a year, meaning lower volumes could drive bigger price moves than before,” wrote analysts led by Sheena Shah.
According to the findings of the analysts, the dominance of Binance in the industry now means that traders from the exchange control the daily price of the asset. This is because Binance has about 80% dominance of the digital currency trading volume.
Bitcoin Momentum and Rise to $30,000
Since Satoshi Nakamoto introduced Bitcoin, the digital currency has always had a very resounding price comeback, so that many observers are often dismayed by its unpredictable nature.
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At the time of writing, the digital currency is down 4.17% at $26,705.78, after reaching as high as $28,803.34 during the last 7-day period according to data from Marketcap. It should be noted that Bitcoin has the positive fundamentals as well as the technical support to break the psychologically important $30,000 level.
There have been warnings that the consistent increase in interest rate increases could further drag the economy and the banks into a tougher position which could lead to more banks filing for bankruptcy. Bitcoin wins both options the Fed chooses to try, as a dovish approach to fighting inflation will also benefit Bitcoin in the medium and long term.
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