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.
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…
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