Erik Weijers, 2 months ago
Will the American Central Bank on March 22 raise interest rates with another 0.25%? In a banking sector that's under severe stress, even higher interest rates could squeeze banks and even undermine trust in the entire financial system. At the same time, inflation hasn't come down to the target of 2%, which demands more interest rate hikes - at least in the opinion of the Fed.
In recent weeks, five banks have gone under, one of which is titan Credit Suisse. (It's ironic, as the former CEO of Credit Suisse once said Bitcoin was a bubble. The Bitcoin price was 7 thousand dollars at the time. Currently, the market cap of Bitcoin is worth two hundred times more than the price at which Credit Suisse was bought up by competitor UBS... revenge is a dish best served cold.)
There is not really much time to linger on these feuds. The markets are looking forward to coming Thursday. Not just for the interest rate number but also for chairman Jerome Powell's speech. How will he outline the path forward?
Powell will have to take the stress in the banking sector into acccount. It has made financial conditions drop sharply. Bloomberg's financial conditions index basically measures how easy it is to borrow. If these conditions are bad, this has a depressing effect on the economy: it's deflationary. That's good, right, because inflation has to come down?
The problem with the Fed's efforts to get inflation down is that it relies on data that lag the rapidly unfolding events. The effect of a banking crisis on inflation data will only be visible in a few weeks or months. Also, job data which the Fed relies on tend to lag.
The poor Fed has to steer a mammoth tanker (the economy) between two cliffs, while looking at a monitor that delays its vision.
Already Bitcoin is doing well, maybe in response to the lost trust in the banking sector. Savers are reminded that BTC is a haven. But what if the interest rates will come down in the coming year, as is expected by many analysts? This might resolve the banking crisis. But this too might be good for Bitcoin. Why? Because risk assets such as stocks and crypto tend to perform well in a regime of lower interest rates.
It seems that, in the current financial climate, Bitcoin strikes a balance between being a safe haven and a risk asset at the same time!
May 19, 2023
Ripple is still fighting the SEC in court over the question of whether XRP is a security or not. While it is expected that the lawsuit will come to an end this year, the company is making big moves on the international market. Recently the company acquired Metaco, one of the big players in institutional custody solutions for digital assets. The deal fits perfectly into the bigger picture. Ripple has always focused on providing solutions for international payments and remittances. Solutions that are meant for institutional customers and not retail clients.
May 03, 2023
Today was the big day, and many traders spent their time in front of their screens waiting for Jerome Powell's speech during the press conference. Another FOMC meeting concluded, and another interest rate hike was announced.
May 01, 2023
Being believers in crypto we favor decentralization, so we don't like the current developments in the USA. Another relatively smaller bank went bust and will be acquired by JPMorgan, the biggest bank of the country.
Apr 25, 2023
The U.S. government reached its self-imposed debt limit or debt ceiling of $31.4 trillion (!) in January 2023. This has forced the US Treasury measures to 'pay out of pocket' to keep the government keep its obligations. The political uncertainty surrounding this debt ceiling is the reason the insurance premium against the US going bankrupt is at the highest price ever.
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