• Bitcoin recently surged beyond $26,000 as interest rate expectations flip.
• The market feared for the solvency of the USDC stablecoin after Silicon Valley Bank and Silvergate collapse.
• Market expectations shifted towards a more dovish stance on future rate hikes with a 72% chance of no hike at next week’s meeting.
Bitcoin Surges Beyond $26K
Bitcoin has surged beyond $26,000 as interest rate expectations flip due to the recent shutdown of three crypto banks. Inflation readings have provided additional impetus as investors dream of a return to lower interest environment and surging crypto prices.
USDC Stablecoin in Danger
The market was particularly concerned with the fate of USDC, the second biggest stablecoin on the market, when news broke that 8.25% of its reserves were held in SVB. Fortunately, the US administration intervened to guarantee deposits would be made whole again, helping to allay fears and kickstart crypto rebound.
Interest Rate Expectations Flipped
The banking sector’s wobble caused an unexpected shift in market expectations surrounding future path of interest rate hikes. With such creaking evident, markets now believe that Fed is more or less done with hiking rates for now – Fed futures currently imply a 72% chance of no hike at next week’s meeting.
Risk Assets Decoupling from Bitcoin
Although this could be considered good news for crypto enthusiasts, there are still reasons for caution moving forward. For example, since the start of 2021 there have been nothing but bearish developments regarding cryptocurrencies and their respective networks – such as the closure of three crypto banks mentioned earlier which will hurt industry growth over time. Additionally, unusual decoupling from other risk assets has been observed since 2021 when it comes to upside movements in bitcoin prices – something which should not be overlooked going forward..
Conclusions
In conclusion then although bitcoin appears to have found some respite after its recent surge past $26K mark – thanks largely to shifting perceptions regarding future rate hikes – there still remain several issues which investors need to keep an eye on before making any decisions about investing into cryptocurrencies going forward
