Bank Collapse Good for Bitcoin? 

After a “week from Hell” for the Banking sector, the market is anticipating a more lenient stance from the Federal Reserve in regards to increasing interest rates following the recent downfall of Silicon Valley Bank. This could potentially provide a glimmer of hope for cryptocurrencies that have been adversely affected by the current economic contraction. 

A year ago, the Fed initiated a vigorous initiative to control inflation by increasing interest rates from their near-zero level last March. However, with interest rates currently hovering between 4.50% and 4.75% and indications of stress within the U.S. banking sector, the likelihood of the Fed raising rates has diminished, and cryptocurrencies have been the beneficiary of this move over the past two days. 

If interest rates have peaked, a dovish change in the Fed’s monetary posture could result in investors allocating more money to risk assets such as tech stocks and crypto. Higher interest rates have made risk assets less attractive compared to conservative ones like U.S. Treasury Bills, which have seen their yields trend upward as the Fed tightens. The two year note yield is now trading at 4.2%, down significantly from 5.1% late last week.

Fed Funds Futures markets are predicting the U.S. central bank will likely begin cutting interest rates at some point in the Summer, with only a 7% chance that interest rates will be at their current levels or higher by December.