According to an analysis shared by an analyst on X, the ongoing rally in Bitcoin is occurring at a pivotal juncture within the broader financial landscape. As the price of the world’s pioneering cryptocurrency edges closer to the $70,000 mark, the outlook for banks in the United States appears less than optimistic, especially in light of upcoming events slated to unfold in the coming weeks.
Late Q1 Through To Q2 2024 Will Define The United States Financial System
While pointing towards a potential alignment of events, including the forthcoming expiration of the United States Federal Reserve’s Bank Term Funding Program (BTFP), the conclusion of the Reverse Repo Facility (RRP), and the scheduled Bitcoin halving, it seems that Bitcoin stands to gain significantly from these developments.
This anticipated tailwind is expected to become more pronounced in March, coinciding with the central bank’s announcement regarding several critical matters, such as interest rates and the fate of the BTFP.
In response to the economic turmoil inflicted by the COVID-19 pandemic, particularly on the financial sector, the United States Federal Reserve initiated the BTFP program in 2020. The primary objective of this program was to provide relief to banks by offering them the opportunity to borrow funds from the central bank for a period of one year.
Through this intervention, the Federal Reserve aimed to alleviate the financial strain experienced by many banks, thereby facilitating the stabilization of the economy.
Similarly, the RRP was introduced during the same period of heightened economic uncertainty brought about by the pandemic. Through this mechanism, the Federal Reserve established a platform for money managers, investment firms, and money market funds to deposit excess cash with the central bank in exchange for interest.
To encourage participation in the RRP, interest rates were raised, incentivizing the transfer of funds from the broader markets, including the crypto sector, to the RRP facility.
Eyes On The Federal Reserve: Will Bitcoin Reach $100,000?
The analyst highlights significant timelines in the financial landscape: the expiration of the BTFP program in March and the conclusion of the RRP facility in May. Notably, the RRP facility, which contributed to a scarcity of hard cash in both the crypto and broader markets during the crypto winter from late 2021, is set to end. The looming question revolves around whether the United States Federal Reserve will opt to extend the BTFP program, thereby enabling banks to continue borrowing.
Although there’s a likelihood of an extension, especially if the central bank adopts a “dovish” stance and reduces interest rates, the fate of the RRP facility remains uncertain.
However, one certainty is the upcoming Bitcoin halving scheduled for April. This event coincides roughly with the pivotal moment when the United States financial system could experience either distress or prosperity following the decision on the BTFP program.
Should the RRP facility not be extended and Bitcoin becomes scarce amid ongoing demand, there’s a strong probability that the cryptocurrency could soar to new heights, potentially reaching $100,000 or beyond.
