As the global banking confidence crisis eases, Binance recovers with capital injection, and stablecoin hot money runs everywhere, the price of Bitcoin has gradually risen from US$24,000 to above US$28,000, heading towards its annual target of US$30,000. In addition, Bitcoin has outperformed most cryptocurrencies, with a weekly increase of more than 25%, which means that the market is quite rational and funds are moving towards the safest place. This wave of buying is rational, not speculative funds.

Let's first talk about the market background. A lot of things have happened in the past two weeks. First, Silvergate Bank collapsed, followed by Silicon Valley Bank (SVB), Signature Bank was taken over by the FDIC, and now the regional bank First Republic Bank has also been named as having a crisis. Finally, Credit Suisse outside the United States has also encountered a crisis due to major defects in its annual report and the fact that its major shareholder, Saudi Arabian National Bank, no longer injects capital.

These events first triggered the market's vigilance against risky assets, believing that there was a chance of developing into a chain storm. The authorities also acted quite quickly, providing liquidity at the first opportunity to save market confidence and ensure that all depositors could withdraw all their deposits. Credit Suisse also obtained US$50 billion in liquidity from the Swiss National Bank, and the crisis was temporarily resolved.

At the same time, the United States also released the latest February price index, the result tends to be the 6% annual growth rate that the market is willing to interpret, which is in line with market expectations and makes it easier for certain people to interpret it as a slowdown in inflation. Major financial media also took the lead in pointing out the trend of slowing inflation. These actions are aimed at creating market expectations that "the Fed will stop raising interest rates or slow down the rate hikes in March at the FOMC."

Now many conditions are in place for the Fed to stop raising interest rates. First, there is the banking crisis, and second, inflation on paper is slowing down. The Fed seems to have no good reason to continue raising interest rates, which has created an environment in which the prices of many risky assets continue to rise, and cryptocurrencies are one of the beneficiaries.

Compared with the U.S. stock market, the recent trend of the crypto market is actually more different, and the capital structure is also being redistributed. Due to the compliance suspension and bank withdrawal problems of BUSD and USDC, and the collapse of all crypto banks, it is becoming increasingly difficult to redeem stablecoins directly from issuers. A large number of stablecoins have been redeemed, exchanged for USDT or simply purchased Bitcoin, driving this wave of Bitcoin's legendary 40% increase from US$20,000 to US$28,000.

The next market focus will be the Fed's FOMC decision this week. Traders are speculating whether the Fed will be dovish due to the above two reasons and choose to postpone the interest rate hike or only raise it by one basis point. Let's talk about this week's script.

How will the Fed respond to the banking crisis? FOMC interest rate meeting is coming up

The question comes back to whether the Fed will turn to an easing policy due to two major factors, namely "banking crisis" and "slowing inflation". We believe that the Fed's policy will indeed be affected, but if we look closely, the reason for the collapse of banks such as SVB is not the collapse of the US bond value, but the bank run called by Peter Thiel and others. No bank can withstand the bank run. If it were other banks, they would not be able to hold on even if they did not invest in bonds but instead made loans. To be more precise, this bank run and bankruptcies have nothing to do with interest rate hikes.

Compared with the high interest rate environment, the panic of depositors is more deadly. The so-called "bank crisis" now is just the depositors' panic that their banks will be run, which has little to do with the decline in bond values. In addition, Credit Suisse is also related to its own operational problems. It has not caused a direct financial crisis due to the rapid rise in interest rates. Otherwise, other banks would probably collapse one after another. Moreover, after the SVB Bank incident, the Fed will examine the US banking system more strictly.

In other words, American banks are still in a relatively safe situation. Many media have compared SVB Bank to Lehman Brothers and exaggerated that a series of banks will go bankrupt in the future. But if you look closely, they are all crypto banks with relatively independent customer risks. In addition, the US government provides liquidity. We believe that there will be no major problems in the future and there is no need to worry too much. Credit Suisse has been in tatters for a long time. Considering that the current stock market has not fallen too much, this time bomb is obviously not a big threat.

Relatively speaking, as banks lose trust in the system, Bitcoin is the safest choice, which makes Bitcoin an investment theme. Part of this buying wave also comes from external funds. It is worth noting that Bitcoin's increase has far exceeded other cryptocurrencies. This trend may continue for some time, because even POS Ethereum has begun to have voices, believing that it should be regarded as a security. Other cryptocurrencies are not to be mentioned, all of them are securities, and only Bitcoin is regarded as a commodity.

In this context, Bitcoin has become the best investment target in the crypto market. Other commodities that are considered securities may suddenly be delisted by the SEC, and even Ethereum is no exception. In such an extreme scenario, only Bitcoin can ensure the security of its own assets and market liquidity. However, this is only one of the factors. The reallocation of funds in stablecoins is probably the main driving force behind the Bitcoin surge.

Next is whether the Fed will suspend raising interest rates due to slowing inflation. We believe that the current price index growth rate is still high, and the Fed should continue to raise interest rates to suppress inflation, but there is a high probability that the rate will be reduced to one basis point, buying time for itself to observe more data. The current FOMC interest rate futures believe that the Fed has a 70% chance of raising interest rates by only one basis point, eventually reaching an interest rate range of 5.00% to 5.25%.

Now the market is just using the financial crisis to threaten the Fed to suspend interest rate hikes. After all, the entire capital market is almost dead in the era of high interest rates. Whether it is private placement, listing or mergers and acquisitions, they are all stagnant. Now cryptocurrency has become one of the best assets. After the SVB crisis is resolved, considering the factors just mentioned, the current buying is quite healthy, which makes us believe that cryptocurrency still has a lot of room for growth. Bitcoin still has a very high probability of reaching the price of US$30,000 this year.

Today's sharing ends here. Later, I will bring you analysis of leading projects in other tracks. If you are interested, you can click to follow. I will also organize some cutting-edge consulting and project reviews from time to time. Welcome all like-minded people in the cryptocurrency circle to explore together. If you have any questions, you can comment or send a private message