JP Morgan

JPMorgan Says Fed’s Loans Will Provide $2 Trillion of Liquidity

The Federal Reserve (Fed) may infuse $2 trillion in liquidity into the market, according to a JPMorgan strategist. What effect will this have on Bitcoin, then, is the crucial issue. According to JPMorgan strategist Nikolaos Panigirtzoglou, the Fed may pump $2 trillion into the American banking system to relieve the liquidity shortage. This is a result of the recent failures of Silvergate, Silicon Valley, and Signature bank.

Fed Liquidity Injection

The Bank Term Financing Program “should be able to infuse enough reserves into the banking system to lessen reserve scarcity and reverse the tightening that has taken place over the previous year,” Panigirtzoglou said, according to Bloomberg.

For the first time since 2008, the Fed raised interest rates in March 2022 by 25 basis points. The Fed has been engaged in aggressive quantitative tightening since that time. Yet since March 2022, the price of bitcoin has decreased by more than 42%.

fed invest 2$ trillion

Will Bitcoin Push to $50,000?

The CEO of cryptocurrency exchange Bitbns, Gaurav Dahake, responded, “This is going to be net positive,” when questioned about the effect of the $2 trillion liquidity injection.

Yet, he adds, “The increased rates could offset it. At present, the situation does not include zero interest. There will undoubtedly be a significant push if the FOMC meeting in March is followed by no rate rise. Rate increases will probably not have a very significant impact, but they would still be beneficial.

“Over time, it drives Bitcoin past $50,000,” continues Dahake, “and Bitcoin halving is now roughly a year away.”

The likelihood that the Federal Open Market Committee (FOMC) won’t raise interest rates at its upcoming meeting is 26.2%.

It should also be highlighted that the biggest banks control a sizeable portion of the $3 trillion in reserves that remain in the US banking system. The quantitative tightening of the Fed and the rate increases that caused a shift away from bank deposits and towards money-market funds, according to JPMorgan analysts, are to blame for the tighter liquidity.

The two-year Treasury bond yield has decreased by more than 60 basis points this week due to speculation that the Fed may decide against raising interest rates next week in an effort to strengthen the banking sector.

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