The cryptocurrency market is experiencing a significant upswing as the Bitcoin price and several altcoins react to the Federal Reserve’s massive $300 billion liquidity injection, a move some interpret as the revival of quantitative easing (QE).
In the face of the ongoing US banking crisis, the Federal Reserve has infused a considerable sum into the economy to avert catastrophe.
SVB, Signature, Credit Suisse, First Republic … it all sounds familiar. @ShardCapital's Bill Blain tells IG’s @AngelineOng why this could be the start of another global bank bailout and where investors can head to find cover. https://t.co/tTD2HQ6LZs
— IG (@IGcom) March 17, 2023
Recent figures from Coinmarketcap indicate that Bitcoin’s price has risen by more than 7% in the last 24 hours. This broad rally has pushed Bitcoin to break past this week’s highs, marking its most bullish performance since June 2022.
However, it remains to be seen whether the bulls can uphold this momentum.
Global Finance on Edge as Banking Crisis Intensifies
The financial sector is increasingly tense as new economic data discloses the extent of the Fed’s efforts to manage a banking crisis that some consider unprecedented.
The numbers are in. The Fed's balance sheet increased by nearly $300 billion last week. pic.twitter.com/OPVD9cQ1LP
— Lyn Alden (@LynAldenContact) March 16, 2023
With concerns over more banks failing in the coming weeks and potential contagion spreading to Europe, cryptocurrencies seem to offer one of the few safe harbors from the turmoil akin to the 2008 Global Financial Crisis.
In this article, we examine the main factors driving the current cryptocurrency market surge.
Federal Reserve’s Cash Infusion Sparks Bitcoin Price Optimism
The Fed’s liquidity boost has given the crypto market a lift, causing some to speculate that quantitative easing is making a comeback.
The failures of Silicon Valley Bank (SVB) and Signature Bank have led the Fed to supply an emergency $297 billion in liquidity, resulting in the expansion of its balance sheet for the first time since interest rates started to climb.
Emergency borrowing from the Fed's discount window reached a new record in the wake of the SVB and Signature Bank failures — beating out the onset of COVID and a 2008 era high. No doubt this is a major stress test for the U.S. banking system https://t.co/lI2EB9M6xo pic.twitter.com/CnSkmfwCSu
— Cezary Podkul (@Cezary) March 17, 2023
Many observers believe that the era of quantitative tightening (QT)—the practice of withdrawing liquidity from the economy—is ending, and a return to its inverse, quantitative easing (QE), is imminent.
The Fed previously adopted this strategy after the GFC and during the COVID-19 cross-market crash in March 2020. In the following years, the US M2 money supply grew by 46% before QT began, while Bitcoin’s price soared from under $4,000 to nearly $70,000.
Gold enthusiast and economist Peter Schiff remarked on Twitter on March 16, “Last week the Fed’s balance sheet ballooned by $300 billion, erasing 4 months of QT in one week. By month’s end, the balance sheet could hit a new high. Rate hikes are irrelevant. Inflation is set to soar, driven by bank bailouts.”
But how will this impact Bitcoin’s price?
Bitcoin Price Prediction and Technical Analysis: The Road to 30,000
At the time of writing, Bitcoin’s price is trading well above the $26,000 level, spearheading cryptocurrencies’ push to retest multi-month highs established earlier this week. The combined cryptocurrency market cap is also on the rise, increasing by over 4.9% on the day to $1.184 trillion according to Coingecko.
In the next section, we’ll delve into a comprehensive technical trading analysis of Bitcoin’s current price action.
Current Bitcoin Price and Moving Averages
At the time of writing, Bitcoin’s price stands at $26,903, marking a 7.74% increase in the past 24 hours. The cryptocurrency’s 20-day EMA is at $23,395, while the 50-day EMA stands at $22,671, and the 100-day EMA at $21,633. These moving averages indicate a strong bullish trend, as the current price is trading well above the short to long-term EMAs.
Relative Strength Index (RSI)
The RSI, a momentum oscillator that measures the speed and change of price movements, currently stands at 70.53. This value indicates that Bitcoin is approaching overbought territory, which may signal a potential pullback or consolidation in the short term.
The MACD is a trend-following momentum indicator that reveals the relationship between two moving averages of a security’s price. The previous day’s MACD histogram was at 335.70, while the current day’s histogram stands at 482.67. This increase in the histogram suggests that the Bitcoin price bullish momentum is strengthening, with the possibility of further price gains.
Bitcoin’s trading volume has increased significantly, with the current volume at 46.7754k, compared to the previous day’s volume of 29.674k. This increase in volume, coupled with the rise in price, indicates a strong buying interest in the market. The volume moving average stands at 27.3K, and with the current volume exceeding this average, it bolsters the bullish momentum even further.
Immediate Resistance and Support Levels
In the short term, the Bitcoin price faces immediate resistance in the $28,000 to $28,500 range. A break above this resistance level could propel it toward a significant psychological level of $30,000.
On the flip side, immediate potential support can be found between $24,500 and $25,000. If the price were to drop and find support at this level, it could provide a solid foundation for the next leg up.
The current market surge, fueled by the Federal Reserve’s liquidity injection and the ongoing banking crisis, has sparked renewed optimism in the cryptocurrency market. As Bitcoin’s price hovers above $26,000, the road to $30,000 seems increasingly plausible. If the bulls can maintain their momentum, the end of the crypto winter may be within reach.
Nonetheless, traders and investors should keep a close eye on the situation, as the global financial landscape remains uncertain and volatile.
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