Bitcoin Crash Or Surge? Fed’s BTFP Program Ends In 5 Days
March 06 2024 - 8:00AM
NEWSBTC
As the US Federal Reserve’s Bank Term Funding Program (BTFP)
approaches its conclusion on March 11, 2024, the Bitcoin and crypto
market stands at a critical juncture. Instituted in March 2023 in
the aftermath of the sudden collapses of Signature Bank and Silicon
Valley Bank, the largest since the 2008 financial crisis, the BTFP
has been a lifeline for US banks, offering loans against
high-quality collateral to ensure liquidity in turbulent times. The
BTFP’s Closure And Its Implications For Bitcoin The BTFP’s
conclusion could send ripples through the financial sector,
affecting banks’ liquidity and possibly leading to tighter lending
practices. Crypto analyst Furkan Yildirim recently detailed on X,
“With the BTFP’s end, banks may face liquidity constraints
impacting their operations and profit margins. This could slow down
economic growth due to reduced lending.” However, he added that
“the Fed might counter this by adopting a more lenient monetary
policy, which could stabilize asset prices and prove beneficial for
Bitcoin and the broader market.” Arthur Hayes, the visionary behind
BitMEX, provided a similar opinion in one of his latest essays. He
identifies a trio of macroeconomic indicators – the Reverse Repo
Program (RRP), the BTFP, and the imminent March interest-rate
decision – as pivotal to the Bitcoin and crypto market. Related
Reading: Deribit Exchange Expects Bitcoin To Rise 20% In The Next
30 Days, Targeting $80,000 Hayes predicts a severe market
correction should liquidity sources, including the BTFP, dry up.
“The market could face a harsh reality check without new dollar
liquidity injections,” he suggests, indicating a possibly rough
transition period for all asset classes, including
cryptocurrencies. The BitMEX founder anticipates a tumultuous
March, with the possibility of a 30-40% correction in Bitcoin
prices triggered by the BTFP’s expiry. Yet, he remains optimistic
about a potential rebound ahead of the Federal Reserve’s meeting on
March 20, hypothesizing that anticipatory actions by the Fed, such
as rate cuts, could reinvigorate the market. “This critical period
could define the near-term liquidity scenario, offering a rebound
opportunity for Bitcoin before further assessing the impact of the
Fed’s decisions on market dynamics,” he explains. More Expert
Opinions Balaji Srinivasan, former CTO of Coinbase, recently also
offered a strategic viewpoint on the synchronicity of more key
events, “BTFP expires in March. BTC halves in April. RRP runs out
in May. All around the same time. So, the US banking system gets
stressed right as Bitcoin gets scarce.” His analysis underscores
the coincidental timing of the BTFP’s conclusion with Bitcoin’s
halving event, suggesting a unique set of circumstances that could
amplify market reactions. Related Reading: Bitcoin Mining Firm CEO
Predicts Start Of ‘Supercycle’, What It Means Ansel Lindner, host
of BTC Markets, provided a commentary amidst growing concerns over
regional banking stability. Following revelations of “material
weakness” in New York Community Bank’s (NYCB) loan risk tracking
and a significant increase in its loan loss reserves earlier this
month, Lindner pointed to potential early signs of another banking
sector stress. “It’s starting… Remember what happened to Bitcoin
during last March’s banking crisis? The BTFP was created on 12
March 2023, Bitcoin rallied 40% within 2 weeks. #SafeHaven,”
Lindner said, highlighting the potential for Bitcoin if the US Fed
decides to intertwine again. In conclusion, the Bitcoin and crypto
markets are at a crossroads on March 11, with potential outcomes
ranging from significant downturns to bullish recoveries,
contingent on the Federal Reserve’s actions and broader
macroeconomic trends. The end of the BTFP signifies more than just
the cessation of a temporary liquidity program; it represents a
moment of truth for the banking sector’s resilience and the crypto
market’s response to shifting economic tides. At press time, BTC
traded at $67,005. Featured image created with DALL·E, chart from
TradingView.com
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