June 13, 2024

‘Deathly Afraid’—Fed’s Powell And Yellen Could Be About To Accidentally Trigger A Huge Bitcoin And Crypto Price Earthquake

BitcoinBTC and crypto prices have bounced back from their 2022 price crash (with a U.S. dollar “paradigm shift” underway that could rock the financial system).

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The bitcoin price has climbed by around 80% over the last 12 months with JPMorgan issuing a surprise bitcoin price prediction this week.

Now, as Donald Trump quietly leans into bitcoin and crypto, the market is braced for the U.S. Federal Reserve to end its funding lifeline for banks, with one closely-watched trader warning it could spark a “financial crisis” and force the Fed to restart its money printer.

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“The cessation of the BTFP [bank term funding program] will cause a mini-financial crisis and force the Fed to stop ‘Talkin’’ and start ‘Yellen’ with a rate cut, tapering of QT [quantitative tightening], and/or a resumption of money printing via quantitative easing (QE),” Arthur Hayes, the founder of crypto derivatives pioneer Bitmex who is now the chief investment officer of a fund called Maelstrom, wrote in a blog post.

“Bitcoin’s price action tells me I’m right and they are wrong,” Hayes wrote, putting his short term bitcoin price prediction between $30,000 to $35,000 before in bounces back later in the year. “The Fed would rather just jawbone the markets with speeches and Wall Street Journal op-eds because they are deathly afraid of inflation.”

This week, the Fed confirmed rumors it will in March end its $160 billion bank term funding program, which was created with the approval of Treasury secretary Janet Yellen amid last year’s U.S. banking crisis that came close to spiraling into a full-blown banking meltdown.

The banking crisis is widely thought to have been sparked by the Fed’s rapid series of interest rate hikes as inflation surged, piling pressure on bank balance sheets that had become over extended during the ultra-loose monetary policies of the Covid-era.

Hayes predicts banks will continue to struggle “until rates are reduced,” adding, “there is no way these banks can survive without the government support provided via the BTFP.”

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Meanwhile, bitcoin and crypto traders, which have been gripped by the Wall Street spot bitcoin exchange-traded fund (ETF) drama over the last few months, are beginning to turn away from tracking bitcoin ETF flows.

“Even if bitcoin ETF inflows disappoint, this is not the time to turn bearish as the macro environment will remain a tailwind in 2024, and the U.S. election cycle will see a constructive fiscal response that will lift asset prices higher,” Markus Thielen, head of research at 10X Research, wrote in an emailed report.

“Sub-$38,000, the ETF hype might be completely priced out and bitcoin goes back to the tunes of macro and liquidity. The time to turn bearish was in early January when we called for a correction back to $36,000/$38,000 when bitcoin traded at $44,000. We would use any further dip to start buying again.”

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