- Fed’s Powell will need to be ready with a carefully worded message on Wed
- Banking issues globally have started to emerge in a hunt for liquidity
- Bitcoin continues to persist, unabated, with a rally decoupled from tradfi
On Wednesday, the FOMC is set to potentially hike another 25bp after a tumultuous past few weeks that have led to a US regional banking crisis. Long duration hold-to-maturity losses, which were largely hiding and not hedged, have spooked many investors and depositors away from smaller community banks and into the top 5 banking behemoths. Over the weekend, there were rumors of a potential Buffett investment into regional banks to bolster confidence but that has either not yet come to fruition or fallen through entirely. First Republic Bank appears to have continued failing investor confidence today, even after $30B in deposits from 11 banks last week. On the other side of the world, UBS is attempting to acquire Credit Suisse via a government-brokered weekend scramble. The deal may hit a snag as it would hit shareholders with significant losses as well as run into issues with AT1 bonds, or contingent convertibles, which may be zeroed out entirely.
On the digital side, outside of the banking ecosystem, things have never looked better. On-chain activity for Bitcoin and Ethereum continue to rise as the technological revolution and renewed purpose for an alternative ecosystem is understood in the US. Ethereum’s Shanghai protocol upgrade, which enables staking withdrawals, is due to be implemented on April 12th.
Although the recent sale and acquisition of Signature bank excludes the digital Signet arm, there are other on ramps and providers willing to work in the digital asset business. The Bitcoin price, specifically, has acted as an inverse vote of confidence for recent global central bank activity. A $300 billion liquidity injection (not a bailout or QE) by the Fed has directly correlated with the Bitcoin rally over the past week.