Crypto markets seem to be pulling a 180 after the Fed announced a relief package for customers who lost money in the recent banking crisis.

The ripple effect of the ongoing collapse in the US banks could trigger a panic selling if US CPI comes in hotter than expected.

ApeCoin and dYdX are two altcoins that are likely to face a massive sell-off this week.

Things are getting really dicey out here as the United States Federal Reserve’s move to cover Silicon Valley Bank (SVB) puts the US regulators in the spotlight. This week is important due to a few things happening in the macroeconomic landscape. 

Banking and stablecoin crisis: A recap of the past few weeks 

To be fair, the whole FUD started with the US Securities and Exchange Commission went after US-based stablecoin issuer Paxos.

Following this was the collapse of Silvergate bank after an en-masse exodus of the company’s crypto customers decided to just up and leave. 

Following the collapse of Silvergate was Silicon Valley Bank, the fallout from which was widespread. It also caused US-based USDC Stablecoin issuer Circle to have $3.3 billion in cash reserves stuck at the bank.

Soon thereafter, Federal Deposit Insurance Corporation (FDIC) issued a statement to shut down Signature Bank, stating systemic risks.

Interestingly enough, Bitcoin price dropped 10% between March 9 and 10 but recovered all the losses in the next two days. 

US CPI and why longing Bitcoin now could be a bad idea

The Fed seems to have placed a backstop and assured the customers a full recovery of the funds stuck in these banks. This development has caused crypto markets to prevent a further collapse and instead undid the losses witnessed over the weekend. 

While the short-term spike may seem enticing, investors need to note the United States Consumer Price Index (CPI) is set to be released on March 14. In his recent testimony, Fed Chairman Jerome Powell noted that curbing inflation was much harder than previously anticipated. Higher-than-expected CPI numbers could trigger a rally for US Dollar, causing the risk-on assets to collapse.

So, market participants need to wait before getting on board the hype train.

Token unlocks

With the markets in uncertain conditions, altcoins provided a respite for traders due to their inherent volatility. This week, two major cryptocurrencies will be unlocking their tokens – Decentralized exchange dYdX and ApeCoin on March 14 and March 17, respectively. 

dYdX will be releasing 6.52 million tokens worth nearly 14 million. 2.8 million will go toward trading rewards, and 2.5 million will be redirected to the community treasury. The remaining 115K tokens will be distributed among liquidity providers as rewards. 

Despite this large-scale unlock, roughly 1.7 billion or 79% of the tokens, will remain locked.

As for ApeCoin, roughly 40.6 million APE tokens worth $175 million will flood the markets in three days. Out of which, 4.1 million will go Yuga Labs, and 2.2 million will be sent to Yuga Labs founders.

#bitcoin #Ethereum #BNB #fed #koinmilyoner

The collapse of Silicon Valley Bank (SVB) has sent shockwaves through the banking industry, serving as a stark reminder of the vulnerability of the sector to the Federal Reserve's policies.

Just a year after the Fed began aggressively raising interest rates, the collapse of Silicon Valley provided Wall Street with the answer to its most pressing question: "When is something going to break?" This marked the largest bank failure since the 2008 financial crisis, forcing managers to reassess the Fed's preparedness to continue tightening policy to combat inflation. Investors are betting that the Fed will only raise rates one more time, if at all, this year, with officials being forced to start cutting rates before the end of the year.

Ironically, the economy is holding up well, companies are still hiring, and default rates remain low, so the acute pain from rising rates has yet to materialize. Currently, the Fed is caught between stubbornly high inflation and signs of stress in the banking industry.

"Now we're starting to see the monetary policy work, albeit belatedly," said Blerina Uruci, chief economist at T. Rowe Price Associates, in an interview with Bloomberg Television on Friday. "The first signs of that are what we're seeing with Silicon Valley. There are likely many businesses and banks that cannot operate at rates higher than this."

The expected 400 bps rate increase by the Fed was expected to brake the labor market, but this has yet to occur. "A year ago, if the Fed had tightened 450 bps in 12 months, you would have thought the economy would go into a recession, but the reality is that it hasn't had much impact."

Although SVB's difficulties are unlikely to pose a systemic financial risk, its stunning collapse is a reminder that the banking industry remains vulnerable to rapidly rising interest rates after years of operating in a low-interest-rate environment. Its failure forced the Fed to establish a new emergency facility that allows banks to pledge a range of high-quality assets for cash loans with a one-year term. And regulators have also pledged to protect even uninsured depositors.

The collapse of SVB shows that monetary policy is starting to have an impact, the question now is how the Fed will balance the task of restraining inflation with the cracks in the economy...

#fed #coin #news #defi