Banking Crisis Looms: Bitcoin and Crypto Markets Eye Biden Speech

Important Week for Bitcoin and Crypto

  • The Bitcoin and crypto markets are facing an important week shaped by macro data and the brewing US banking crisis.
  • At the beginning of last week, odds of a Fed rate hike at the next FOMC meeting were high, but this has changed.
  • Financial world will be looking at US President Joe Biden’s speech on the US banking crisis to determine whether crypto is scapegoated.

US Banking Crisis Impacting Markets

The financial markets are currently facing a volatile climate due to the brewing US banking crisis. At the start of last week, it seemed likely that the Federal Reserve would raise interest rates by 50 basis points at their March 22nd meeting. However, in light of recent events, this no longer appears likely as Goldman Sachs economist Jan Hatzius noted 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.” In order for markets to remain stable, it is essential that President Biden address these issues in his upcoming speech.

Biden Speech Crucial To Crypto Industry

President Biden’s speech will be especially crucial to those within the crypto industry, as he must address whether or not Silicon Valley Bank (SVB) problems stem from investing $91 billion in long-dated securities such as mortgage bonds and U.S. Treasuries which have now lost $15 billion due to recent Federal Reserve activity. If he does acknowledge this issue, it could signal direct implications on Fed policy going forward.

Fed In Tough Spot

The Federal Reserve is in a difficult position; if they raise interest rates too quickly then it could add more stress onto already struggling banks but if they do not raise rates soon enough then their target inflation rate may not be met. According to The FedWatch Tool, only 55% now expect a 25 basis point hike due to recent developments.

Bitcoin Value Could Increase

If President Biden’s speech leads investors to believe that there will not be any further hikes from The Federal Reserve anytime soon then this could mean good news for Bitcoin and other cryptocurrencies; while many investors see digital currencies as an alternative hedge against inflationary assets like gold and silver, higher rates tend to depress demand for cryptocurrencies such as bitcoin since they offer no yield themselves. Therefore if rates stay low then demand for bitcoin could increase significantly over time.