The 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 brewing 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 skyrocketing, the situation has changed dramatically.
These Events Will Be Crucial For Bitcoin And Crypto
This Monday morning at 8:00 a.m. (EST), the financial world will be looking at US President Joe Biden’s speech on the US banking crisis. Of particular interest to the crypto industry will be whether the US President scapegoats 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 watch whether 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 on 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 recent stresses in the banking sector.
Big 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
In general, the Fed is in a tough spot: a hike could spread fear in the markets of further defaults in the financial sector, while a no hike could send the wrong signal and drive up risk assets, while the Fed’s 2% inflation target is still a long way off.
In the wake of the events of the past few days, only 55% now expect a 25 basis point hike, according to the FedWatch Tool. 45% even predict a pause, as does Goldman. If this proves true, it will be an extremely bullish catalyst for risk assets like Bitcoin and crypto.
Meanwhile, it will also be interesting to see whether 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 chart says serious concern it will?https://t.co/QemgkCCwAv
— Jim Bianco biancoresearch.eth (@biancoresearch) March 13, 2023
Macro Data This Week
On Tuesday, March 14 at 8:30 a.m. EST, the most important macro data point of this week will come out. The U.S. Bureau of Labor Statistics releases 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 predicted. For the month of February, experts expect a decline 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 estimates, the US dollar is likely to gain further ground in the short term. Whether this will have an impact on the Bitcoin price and risk assets, however, remains to be seen. Goldman Sachs’ assessment effectively says that tomorrow’s CPI report is essentially a non-event due to the banking crisis.
On Wednesday, March 15 8:30 a.m. (EST), the latest U.S. Producer Price Indices (PPI) for the prior month of February will be presented. Although the PPI is nowhere near as significant as the CPI, it is worth a look.
Forecasts see a month-over-month increase of 0.4 percent. 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 is likely to gain further strength and could thus provide a headwind for the crypto market. If producer price indices are below estimates, Bitcoin is likely to rally further.
At press time, the Bitcoin price was at $22,284, up 8.2% in the last 24 hours.
Featured image from Wisconsin Bankers Association, Chart from TradingView.com