According to a JPMorgan strategist, the Federal Reserve (Fed) might inject $2 trillion liquidity into the market. So the big question is what will be the impact on Bitcoin? JPMorgan strategist Nikolaos Panigirtzoglou believes that the Fed might inject $2 trillion of funds into the U.S. banking system to ease the liquidity crunch. This is […]
According to a JPMorgan strategist, the Federal Reserve (Fed) might inject $2 trillion liquidity into the market. So the big question is what will be the impact on Bitcoin?
JPMorgan strategist Nikolaos Panigirtzoglou believes that the Fed might inject $2 trillion of funds into the U.S. banking system to ease the liquidity crunch. This is due to the collapse of Silvergate, Silicon Valley, and Signature bank in the last week.
JPMorgan estimates that the FED’s recent emergency loan program could inject up to $2T of funds into the U.S. banking system over the next 12 months.
This is “set to reverse impact of tightening.”
— Miles Deutscher (@milesdeutscher) March 16, 2023
Fed Liquidity Injection
According to Bloomberg, Panigirtzoglou wrote, “The Bank Term Funding Program should be able to inject enough reserves into the banking system to reduce reserve scarcity and reverse the tightening that has taken place over the past year.”
The Fed increased interest rates by 25 basis points in March 2022 for the first time since 2008. Since then, the Fed has been in an aggressive quantitative tightening mode. And the price of Bitcoin is down more than 42% from March 2022.
Will Bitcoin Push to $50,000?
When asked about the impact of the $2 trillion liquidity injection, Gaurav Dahake, the CEO of crypto exchange Bitbns, told BeInCrypto, “This is going to be net positive.”
But, he says, “It could get neutralized by the higher rates. It is not a zero-interest scenario right now. There is an FOMC meeting in March, so if it is coupled with no rate hike, then of course, it is going to be a massive push. If rate hikes continue, it will probably not have an extremely positive effect, but it would still be positive.”
Dahake adds, “Over time, it pushes Bitcoin over $50,000, and Bitcoin halving is about a year away now.”
Flight to Crypto Caused by Unease
Robert Quartly-Janeiro, the Chief Strategy Officer of Bitrue told BeInCrypto, “Although the Fed has set aside $2 trillion for the bank liquidity facility, it is anticipated that the facility won’t be fully used by banks, especially the big five. If it is, and the Bank of America looks under some pressure, then market volatility could be sizeable.
“Whilst it shows the lengths to which the Fed is willing to go on one hand to ensure banks are stable through some very targeted QE, the risks of quantitative tightening remain as this new policy enables the Fed to carry on rising rates to deal with inflation.
“As for the impact of the program, it will be telling to see if a risk on or risk of environment ensues – in essence, do markets just rise with the new capital sloshing in the system? The flight towards crypto and Bitcoin seen in recent days is arguably a reaction to increasing unease about the U.S. monetary system.”
There is a 26.2% probability of no interest rate hike at the next Federal Open Market Committee (FOMC) meeting, according to analysts.
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