The US Fed adds $297 Billion In A Week, Fanning Bitcoin Rally

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The total amount of assets held by United States Federal Reserve (Fed) banks increased by 3.56% in the past week, from $8.342 trillion to $8.639 trillion. tracker Show on 17 March.

The Fed injected $297 billion into the market last week

With the Fed holding assets after the collapse of three banks last week and injecting $297 billion in the past week alone, the central bank is back on quantitative easing.

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The result is what observers say is a “Fed put”, a phenomenon where the central bank intervenes and implements an accommodative policy whenever equity markets experience a sharp price drop. Earlier this week, bank shares crashed on widespread fears of a bank run should the Fed fail to intervene.

observers Comment That $297 billion increase from the previous week was not due to asset purchases from the previous week, declines in Treasuries and mortgage-backed securities.

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Instead, the expansion was due to a $12 billion bank term funding program and a series of loans given to shore up major banks. For this action, the Fed has unleashed what it has tried to achieve over the past year.

The “Fed Put” is back on its balance sheet with $297 billion in assets as of last week, the biggest increase since March 2020. Thus almost half of the quantitative test since last April was undone in a week.

bitcoin and crypto prices rally

Following the collapses of Silvergate Bank, Silicon Valley Bank (SVB), and Signature Bank, all of which were believed to be crypto-friendly and aided blockchain projects as a way to process funds, bank stocks collapsed across the board. .

Meanwhile, USDC, a stablecoin pegged to the US dollar, was briefly de-pegged following news that it had locked $3.3 billion in SVB.

In addition, there was turmoil in DAI, an algorithmic stablecoin managed by MakerDAO, one of the largest DeFi protocols. MakerDAO took steps to ensure that DAI remained equal to USD, boosting the platform’s governance token, MKR.

MakerDAO price on March 17.  Source: MKRUSDT on Binance, TradingView
MakerDAO price on March 17. Source: MKRUSDT on Binance, TradingView

While normalcy has returned and bitcoin is trading above $26,000, a nine-month high, intervention by the US government and the Fed seem to have failed most of their tightening efforts over the past few months. .

As trackers show, the Fed has been slowly removing assets from its portfolio over the past months. This was when he tightened around the economy, intervening to contain runaway inflation.

The tightening appears to have worked, as recent economic data showed that inflation fell to 6% in February, the lowest in 15 months. This contraction in consumer prices was in line with market expectations.

Feature image from Andrew Harnick/AP, chart from TradingView

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