Bitcoin and other cryptocurrencies experienced a bullish surge above $22,000 as the US Federal Reserve began injecting liquidity into the economy, a move which can rival any classic Bitcoin comeback. The volatility was due to events in the US after the failure of one bank and the forced shutting of another. Silicon Valley Bank and Signature Bank are the latest victims in a brutal year for financial institutions under the Fed’s rising interest rates.
The announcement of the Bank Term Funding Program effectively marks a return to Federal Reserve liquidity injections, whereas before liquidity was being withdrawn from the US economy. As market commentators were quick to point out, the decision effectively constitutes a “pivot” on interest rate hikes or overall policy. The creation of the Bank Term Funding Program was described by popular commentator Tedtalksmacro as a form of “stealth QE.” Crypto as a whole is highly sensitive to central bank liquidity trends, not just those in the US.
Among those underlining this is Arthur Hayes, former CEO of derivatives exchange BitMEX, who, in a blog post earlier in the year, described how changing liquidity conditions would likely impact Bitcoin and altcoin performance. Speculation was rampant on the day that this month’s decision on interest rate adjustments may yield either a reduction or see the Fed leave the current rate unchanged. Markets had been swinging between a 0.25% and a 0.5% increase to the benchmark rate at the March 22 meeting of the Federal Open Market Committee.