MacroSlate Weekly: Bitcoin Shines Through Bank Failures and Bailouts – CryptoSlate

Macro Highlights

• US inflation too high for rate relief, but generally in line with expectations
• The ECB raised another 50 basis points, bringing its deposit facility rate to 3%
• Silicon Valley Bank files for Chapter 11 bankruptcy
• Credit Suisse and First Republic Bank continue to be supplied with liquidity
• Fed launched stealth QE as balance sheet grows

Bitcoin Highlights

Stealth EQ and Rescue Plans

Stealth bailouts

Credit Suisse grabbed a liquidity lifeline launched by the Swiss National Bank and borrowed up to CHF 50 billion, equivalent to 6.25% of Swiss GDP. Credit Suisse’s share price has fallen around 20% this week as its default swaps continue to soar.

It’s not just Credit Suisse that has been given a lifeline; The share price of First Republic Bank (FRB) has fallen 78% in the past month. News broke that 11 major banks were helping FRB by pledging $30 billion. However, the stock continued to slide in Friday’s session.

Stealth EQ

The Fed’s balance sheet grew by more than $300 billion this week, which jumped to $8.69 trillion, wiping out half of the quantitative tightening the Fed has carried out over the past year.

The increase in the balance sheet results from the BTFP program; put simply, it allows institutions to exchange devalued assets for cash at full value. Additionally, the Fed’s discount window went parabolic at $148 billion this week, the highest level since 2008. Again, put simply, troubled banks are asking the Fed for cash.

Balance sheet growth

• Approximately +$148.3 billion – net borrowing from the discount window.
• Approximately +$11.9 billion – the new term funding program for banks

Subtotal: $160.2 billion

• Approximately +$142.8 billion – borrowings for banks seized by the FDIC Total:

This totals = $303 billion

The ECB raises 50 basis points without taking forward guidance into account

The ECB rose 50 basis points for the third consecutive session, raising its deposit facility rate to 3%. Just six months ago, the deposit rate was at 0. Lagarde and the ECB remain firm in their “commitment to fighting inflation”, which is “planned to be too high for too long”.

Forward guidance removed and no understanding of future movements, instead reiterated, “the high level of uncertainty reinforces the importance of a data-dependent approach.”

All eyes are on the FOMC next week

The next FOMC meeting is March 22, and the markets are expecting a 25 basis point rate hike, and assuming there’s nothing else of a major break, I think we we will get it. After that, anyone can guess the future trajectory of fed funds.

Powell comes to the meeting with a stark choice between trying to contain inflation or saving a fragile financial system.