Lock Into These 5 Events: They Will Determine The Bitcoin Price!

The bitcoin and altcoin market is reacting positively to the news that the Fed has re-established liquidity after the bankruptcies of Silicon Valley Bank and Signature Bank. The upcoming interest rate decisions and the reaction from critical technical levels can have a direct impact on Bitcoin.

5 things to know about Bitcoin (BTC) this week

Fed bails Silicon Valley Bank victims

Bank of Silicon Valley (SVB) was shut down by California’s financial watchdog on March 10 after it announced a major asset and share sale aimed at raising additional capital. Swallowing hundreds of billions of dollars in deposits, the SVB had to incur a massive $1.8 billion loss as it parked consumer funds in mortgage-backed securities.

A snowball effect soon followed as depositors became wary that something could go wrong with liquidity. Everyone suddenly tried to withdraw money from the SVB and not enough funds were available, requiring assets to be sold at a loss and an ultimately unsuccessful emergency financing round.

The result came as the Fed stepped in to stop depositors’ money. On 12 March, it announced the “Bank Term Financing Program” (BTFP). The joint statement from the Department of the Treasury, the Fed Board and the Federal Deposit Insurance Corporation (FDIC) confirmed that “Depositors will have access to all of their money starting Monday, March 13.”

Speculation gathers on Fed rate ‘turn’

With liquidity returning to the market, crypto wasn’t the only one wondering about the fate of the Fed’s quantitative tightening (QT) policy that has been in place for the past 18 months. Speculation was common that this month’s rate adjustment decision could lead to a cut or that the Fed would not change the current rate. Previously, the markets oscillated between 0.25% and 0.5% increase in the benchmark interest rate at the Federal Open Market Committee’s (FOMC) meeting on March 22.

“In light of the stress in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22,” Goldman Sachs economist Jan Hatzius said in a note quoted by CNBC and others on March 12.

Popular cryptocurrency analyst Michaël van de Poppe noted that next week will produce another price catalyst in the form of February CPI inflation data. “’QE’ and ‘Recovery’ for banks means temporary relief + potential good CPI and no further rate hikes (or 25 basis points),” he wrote on March 13 as part of his Twitter comments.

“Markets are now waiting for CPI to greenlight,” continued popular analytics account Daan Crypto Trades. In light of the BTFP decision, Alasdair Macleod was more cautious, warning against the assumption that the Fed has abandoned QT forever; “The initial market response to the banking crisis is based on the perceived Fed axis. But that could be a mistake,” he tweeted.

According to CME Group’s FedWatch Tool, overall expectations are in favor of a further increase on March 22, rather than a stagnant benchmark rate. However, 0.5% was off the table.

Bitcoin price jumps to $22.7K on violent reversal

However, the Bitcoin price rose sharply on March 13. According to data from TradingView, it is currently eroding the $24,200 resistance after hitting local highs of $22,775 on Bitstamp.

Much of the recovery from the March 10 lows of under $20,000 came after the Fed liquidity announcement, but it completely erased all traces of the SVB boom.

How did analysts interpret current Bitcoin price movements?

Popular commentator Bitcoin Archive summarized, “Bitcoin survived the biggest bank crash in the US since 2008 in just 3 days.” Van de Poppe argued that $21,300 should be held to facilitate the long position potentially reaching $23,700. Other trader Crypto Chase continued, “22,700 seems ripe to take liquidity.”

Professional trader Jackis noted that last week’s low exactly matched the 0.618 Fibonacci retracement level from the 2023 highs above $25,000. “It is not surprising that we are pumping big monthly support,” Credible Crypto said about the current price behavior on 4-hour timeframes.

Bitcoin’s weekly close thus came much higher than expected and surpassed $22,000. For Rekt Capital, this “probably” paid off on the bearish double top pattern that played on the weekly timeframes. “Weekly Close above $21,770 likely invalidates the Double Top,” part of a tweet dated March 12 read.

Still, further analysis pointed to April as the closest point Bitcoin could begin to influence a longer-term trend change. “BTC response greater than $20,000, the Low Range of this Macro Range,” Rekt Capital wrote. “As long as it holds $20,000, BTC has a chance to challenge the Macro Downtrend once again in the coming weeks. This is April at the earliest.” he added.

USDC seeks to regain dollar stable

In what may have caused investors to breathe a sigh of relief this week, an early crypto casualty of the SVB crash kicked off again on March 13. USDC traded at $0.99 on Bitstamp after falling 20%, as assurances from issuer Circle helped calm the current panic.

In a Twitter thread on March 12, CEO Jeremy Allaire confirmed that BNY Mellon and a new unnamed banking partner would take over from where Signature and SVB abruptly left off. The press release added, “The trust, safety and 1:1 redeemability of all circulating USDC is of paramount importance to Circle, even in the face of the bank contamination affecting the crypto market,” he added, praising the actions of the Fed and US lawmakers.

The largest US exchange Coinbase has confirmed that USDC conversions will begin on March 13. Shortly after, Changpeng Zhao, CEO of Binance, the largest global exchange, also announced that some of its own branded stablecoin, Binance USD, has been converted. This was one of the main catalysts behind the March 13 rally.

Sensitivity recovers as risk of “short squeeze” increases

As a reflection of how sensitive crypto market sentiment continues to be to macro events, the Crypto Fear and Greed Index returned to “fear” for the first time in two months on March 10.

Recent events have witnessed a dramatic turnaround of the Index’s score from 33/100 to 49/100 – classified as “neutral” – in a single day.

However, the downward trend continues in derivatives exchanges. Weekend funding rates hit their lowest level since the FTX crash in November 2022, according to data from on-chain analytics firm Glassnode.

“Longs are paid to be long,” Tedtalksmacro summarized.

Extreme negative funding rates are the ability to trigger a “short squeeze,” an event in which shorts are liquidated en masse in a cascading-like domino effect as the majority of the market expects the price to continue falling.

According to data from Coinglass, cross crypto short sale liquidations exceeded $150 million on March 12 alone and totaled $39 million on March 13.