Is the US Federal Reserve’s bailout of international banks a bullish signal for Bitcoin?
- The US Federal Reserve is taking coordinated action, enhancing daily international swap lines.
- US Dollar swap line balances will balloon and reflect on the central bank’s balance sheet, while Bitcoin prices continue rising amidst uncertainty.
- The failure of two US banks and a rout in Credit Suisse shares sent shock waves through the market, reminding participants of the 2008 financial crisis.
The US Federal Reserve has announced a coordinated effort with five other central banks to boost US Dollar liquidity. The Fed’s reaction to a series of banking collapses in the US and Europe is to enhance the frequency of 7-day maturity operations of international swap lines from weekly to daily.
Swap lines are agreements between central banks to exchange currencies and shore up liquidity during times of crisis. Experts believe this is a bullish sign for Bitcoin and cryptocurrencies as an economic crisis similar to 2008 is brewing on the horizon.
US Federal Reserve coordinates central bank action, shores up US Dollar liquidity
While crypto Twitter is abuzz with calls for the collapse of the US banking system, the Federal Reserve is taking coordinated action with other central banks. The US central bank’s goal is to enhance liquidity provision via swap line arrangements.
To stabilize the US economy after the collapse of two large banks, the Fed stated in a press release issued on March 19, that it was working with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank.
Coordinated central bank action to enhance the provision of U.S. dollar liquidity: https://t.co/Qs4cYY8BFO
— Federal Reserve (@federalreserve) March 19, 2023
The coordinated effort is aimed at keeping the US dollar flowing amid a series of banking blowups in the US and Europe. Swap lines have served as an emergency-like action for the Federal Reserve in the 2007-2008 global financial crisis and the COVID-19 pandemic in 2020.
Is the US Fed’s move bullish for Bitcoin and cryptocurrencies?
Jim Rickards, an author and journalist, believes that the US Dollar crisis is spreading faster. Since international banks need US Dollars, the US Central Bank prints USD and swaps with these institutions, swapping back later and collecting interest on it.
Former BitMEX CEO Arthur Hayes tweeted:
1/ Swap lines what's going on?
— Arthur Hayes (@CryptoHayes) March 20, 2023
TLDR another way to bailout non-US banks that isn't obvious to the average person.
The collective action by central banks will therefore reflect on the US Fed’s balance sheet and crypto experts consider this a sign of a brewing financial crisis. Crypto enthusiasts believe that this will push Bitcoin price higher.
Ryan Selkis, CEO at Messari believes that the banking crisis and general economic conditions will help boost Bitcoin prices. Selkis’ prediction for Bitcoin price is a target of $100,000 within the next twelve months, in the best case scenario.
Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
