Bitcoin Hits 9-Month High As Banks Come Under Pressure

Bitcoin surged to a 9-month high last week following the US Federal Reserve’s announcement of the Bank Term Funding Program (BTFP), which provides a backstop for banks struggling with depositor withdrawals. 

Bullish momentum was then further buoyed by the release of in-line CPI and PPI results which could allow the Federal Reserve to take its foot off the interest rate pedal. 

Elsewhere, Credit Suisse, a bank integral to the financial system, was saved by the Swiss National Bank and UBS, and Ethereum’s developers confirm a date for the Shanghai hard fork. 

• Bitcoin secures 25% weekly increase on Central Bank relief
• Bitcoin technicals flash green
• Credit Suisse saved by Swiss National Bank and UBS
• ETH supply drops by 66,000 as unstaking is locked in for April

Bitcoin secures 25% weekly increase on Central Bank relief

Bitcoin surged to a 9-month high last week as the US Federal Reserve confirmed it would be injecting liquidity into the markets again through a new scheme called the Bank Term Funding Program (BTFP).

Acknowledgment of the new BTFP first came on Sunday, March 12th, which resulted in Bitcoin quickly returning back to the previous 2023 high level of $25,200. 

However, with the Fed’s move representing a significant shift from quantitative tightening (QT) to quantitative easing (QE), Bitcoin continued to rise as the week progressed. 

The BTFP offers additional funding for banks so that the needs of depositors can be met. This funding is provided for a period of one year if the bank can deploy bonds, mortgage-backed securities, and other assets as collateral.

During the week, JPMorgan speculated that the new program could result in an additional $2 trillion hitting the economy – a confirmation that supercharged Bitcoin’s price movements.

Bullish optimism continued to proliferate as Consumer Price Index (CPI) and Producer Price Index (PPI) results were released on Tuesday and Wednesday.

Both data releases were in-line with market expectations which many believe provides the Federal Reserve with extra room to consider its next interest rate decision.

There are two paths that the Fed can take: either raise rates to combat further inflation but risk further financial difficulties, or leave rates flat to relieve financial struggles but risk inflation continuing to run hot.

With two days remaining until the 22nd March FOMC meeting, 40% of traders believe the Fed will not implement an interest rate hike, while 60% of traders believe a 0.25% interest rate hike will be proposed.

 

CME’s FedWatch Tool estimates for next interest rate decision

Bitcoin technical indicators flash green

With Bitcoin’s latest price advance, many are beginning to question if the overall macro downtrend is coming under pressure.

Bitcoin has been trading in a downtrend since November 2021. However, technical indicators maintaining that downtrend are now beginning to be broken. 

On a weekly timeframe, Bitcoin has pushed above the zone of resistance situated at $24,000 – a zone that Bitcoin’s price had been trading beneath since June 2022. 

The sustained pressure from bulls now means that Bitcoin sits above both the 50-week and 200-week moving averages. 

Investors deem this as important as both the 50-week and 200-week moving averages are considered strong elements of price support. 

Meanwhile, on the daily chart, Bitcoin has also moved above both the 50-day and 200-day moving averages. 

This last occurred in September 2021 just before Bitcoin moved on to secure its previous all-time high of $69,000. 

With that being said, technical indicators cannot infer the future price movement of Bitcoin. 

For the price of Bitcoin to continue higher, it must now overcome the next zone of resistance which sits at $29,000. This zone corresponds with a period of price consolidation from May 2022.  

Weekly BTC/USD chart with RSI indicator

Credit Suisse saved by Swiss National Bank and UBS

Importantly, the Federal Reserve was not the only Central Bank last week helping to prop up a struggling financial system. 

As a result of the shaky ground left by the collapse of SVB and Signature banks, Credit Suisse, one of the largest banks globally, began to feel the effects of the turmoil.

Chaos for Credit Suisse first ensued after the bank revealed that material weaknesses were found in its financial reporting process for 2021 and 2022. This announcement resulted in a 21% drop in the bank’s stock on Wednesday, prompting the trading of the stocks to be halted.

The Swiss National Bank quickly intervened the following day, offering Credit Suisse $54 billion worth of Swiss Francs to calm investors – a move that was deemed necessary as Credit Suisse is regarded as an integral bank to the overall economy. 

It is worth noting that Credit Suisse has been struggling financially, having recorded an $8 billion loss in 2022, which is the largest loss since the 2008 financial crisis. 

In addition to the lifeline, the Swiss National Bank also established talks with UBS, another Swiss Investment Bank, on the possibility of taking over Credit Suisse.

After a long round of weekend discussions, it was confirmed on Sunday that UBS has agreed to purchase Credit Suisse and take over all of its assets. 

The deal which was settled at $3bn, is expected to be completed by the end of this year. 

The effects of the new merger are expected to ripple throughout the markets on Monday. 

 

ETH supply drops by 66,000 as unstaking is locked in for April

Ethereum, the world’s second-largest cryptocurrency by market capitalisation, reached a new 2023 high over the weekend, surpassing the $1,800 mark. 

Meanwhile, the cryptocurrency is preparing for its most significant upgrade since the Merge last year – the Shanghai Hard Fork – which is now scheduled to take place in just a few weeks.

According to an announcement from developers, the Shanghai upgrade is anticipated to take place on April 12th and will bring a major transformation to Ethereum’s network. 

The new upgrade will allow users to withdraw staked ETH from the Beacon Chain – something that has never been possible before. Many are now wondering how this new feature will impact ETH’s price. 

Some believe that the ability to withdraw staked ETH will lead to a fall in prices as users withdraw and sell their coins. However, others think that the upgrade will lead to more staking flexibility, encouraging more individuals to stake their ETH, resulting in a rise in prices.

Alongside new anticipation regarding the upgrade, IntotheBlock, an on-chain analytics provider, confirmed last week that ETH’s supply had reduced by 66,000 since the Merge took place.

Through the fractional burning of transaction fees, Ethereum has now become deflationary, with more coins now being removed from circulation when compared with those being entered.  

According to data from Ultrasound.money, in the past 30 days, ETH’s deflation hit a record high as the total ETH supply dropped by approximately 1%.  

Net issuance of ETH before and after the Merge

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