Fed may inject $2 trillion into US banking system

The Federal Reserve (Fed) could inject $2 trillion of liquidity into the market, according to a JP Morgan strategist. In such a situation, the big question is, what will be the effect on bitcoin?

JP Morgan strategist Nikolaos Panigirtzoglu believes that the Fed could pump $2 trillion into the US banking system to ease the liquidity crunch. This is due to the collapse of Silvergate, Silicon Valley and Signature Bank last week.

fed liquidity injection

“The bank term funding program should be able to inject enough reserves into the banking system to ease the reserve shortfall and reverse the tightening that has occurred over the past year,” Panigirtzoglu wrote, according to Bloomberg.

The Fed raised interest rates by 25 basis points in March 2022 for the first time since 2008. Since then, the Fed has been in an aggressive quantitative tightening mode. And the bitcoin price is down more than 42% since March 2022.

bitcoin chart from tradingview
BTC/USD, Coinbase. Source: TradingView

Will bitcoin reach $50,000?

Asked about the impact of the $2 trillion liquidity injection, Gaurav Dahke, chief executive officer (CEO) of crypto exchange Bitbns told BeInCrypto, “It’s going to be a net positive.”

But, he says, “it could be neutralized by higher rates. It’s not a zero-interest scenario right now. There’s an FOMC meeting in March, so if it’s coupled with no rate hike, it’s certainly a There will be a big push. If the rate hikes continue, it probably won’t have a very positive effect, but it will be positive nonetheless.”

“Over time, this pushes bitcoin above $50,000, and the bitcoin halving is about a year now,” Dahake said.

There is a 26.2% chance of an interest rate hike at the next Federal Open Market Committee (FOMC) meeting.

Next interest rate hike likely from CME Group.  Nikolaos Panigirtzoglu, strategist at JP Morgan
Source: CME Group

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BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.

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