These events will be decisive

by Arthur · March 13, 2023

Bitcoin and crypto markets are once again facing an extremely important week, which will be shaped not only by macro data, but also by the looming US banking crisis. While at the beginning of last week the odds of a Fed rate hike of 50 basis points at the next FOMC meeting on March 22 were sky high, the situation has changed dramatically.

These events will be decisive for Bitcoin and Crypto

This Monday morning at 8:00 AM (EST), the financial world will be watching US President Joe Biden’s speech on the US banking crisis. Of particular interest to the crypto industry will be whether the US president blames crypto for the collapse of the banks. Biden said, “I am committed to holding those responsible for this mess fully accountable.”

On the other hand, it will be crucial to see if Biden acknowledges that Silicon Valley Bank’s (SVB) problems stem from the fact that it parked $91 billion in deposits in long-dated securities such as mortgage bonds and U.S. Treasuries that were considered safe but are now worth $15 billion less after the Federal Reserve aggressively raised interest rates.

If he does, it could signal direct implications for the Fed’s interest rate policy. Goldman Sachs economist Jan Hatzius already said in a Sunday note: “In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22.”

Just in the last hour: Goldman Sachs no longer sees the Fed raising interest rates next week due to the latest strain on the banking sector.

Great call. Goldman economists have basically said tomorrow’s CPI print is a non-event now. pic.twitter.com/ksTpK8ecNY

— David Ingles (@DavidInglesTV) March 13, 2023

Overall, the Fed is in a tough spot: a hike could spread fears in markets of further defaults in the financial sector, while a no hike could send the wrong signal and increase risk assets, while the Fed’s 2% inflation target remains a long way off.

In the wake of the events of the past few days, only 55% now expect a 25 basis point increase, according to the FedWatch Tool. 45% even predict a pause, as does Goldman. If this turns out to be true, it will be an extremely bullish catalyst for risk assets like Bitcoin and crypto.

In the meantime, it will also be interesting to see if there will be further bank runs on smaller banks that investors no longer trust. In this regard, contagion effects for Bitcoin and crypto cannot be ruled out. First Republic Bank Could Be Next?

This is the center of the financial universe right now.

Will the bank run continue to spread? Is the chart saying serious concern it will?

— Jim Bianco biancoresearch.eth (@biancoresearch) March 13, 2023

Macro data this week

Tuesday 14 March at 08:30 EST the most important macro data point this week comes out. The US Bureau of Labor Statistics publishes the final US inflation data for the month of February.

In January, US inflation came in at 6.4% year-over-year, above the forecast of 6.2% and rising more than forecast. For the month of February, experts expect a decrease to 6.0%. If analysts’ expectations are confirmed, the crypto market will most likely continue its relief rally.

If, on the other hand, the consumer price indices are above the estimates, the US dollar will probably gain further ground in the short term. However, whether this will have an impact on the Bitcoin price and risk assets remains to be seen. Goldman Sachs’ assessment effectively says that tomorrow’s CPI report is essentially a non-event due to the banking crisis.

Wednesday 15 March at At 08:30 (EST) the latest US producer price indices (PPI) for the previous month of February will be presented. Although the PPI is not nearly as significant as the CPI, it is worth a look.

The forecasts show an increase from month to month of 0.4 per cent. Producer prices had already risen by 0.5 percentage points month-on-month in January. If the price increases as expected by the experts, the US dollar will probably strengthen further and could thus provide a headwind for the crypto market. If producer price indices are below estimates, Bitcoin is likely to rise further.

At press time, the Bitcoin price was at $22,284, up 8.2% in the last 24 hours.