Bitcoin (BTC), which has risen to nearly $45 thousand since March 1, saw interest rate speculators reduce their bets for aggressive rate hikes by 2022. Meanwhile, the number of whale addresses jumped amid speculations that BTC may be proving itself to an apolitical safe haven.
March: Traders lower half-point wagers
BTC’s price soared by more than 4% to nearly $45,000 a day after it recorded its largest one-day rise since February 2021. This was in response to a flurry sanctions on Russia including a ban on accessing the global financial system SWIFT. It raised concerns about their impact on global growth as well as inflation.
Swaps that were tied to the Federal Reserve’s March meeting in mid-March anticipated a 24.5 basis points (bps) tightening starting March 1, 2022. This indicated that a 0.5-bps rate rise — which was approved by interest rate traders at 100% last month — is less likely.
US Forward Swaps – Federal Funds Effective Rate. Source: Bloomberg
According to Lisa Abramowicz of Bloomberg, traders have also decreased their expectations for rate hikes in 2022 from seven days ago.
Implied overnight rate, number of hikes/cuts. Source: Lisa Abramowicz
As investors demanded safe-havens such as U.S. Treasuries or gold in the last few days, the Fed outlook was retracted.
Bitcoin lost over half its value earlier due to Fed rate hike fears. However, it has seen a sharp recovery, partly due to reports that Russians were buying crypto to circumvent sanctions.
“Bitcoin saw a significant upmove today as it appears that it has slightly regained their safe-haven status, while the Russia-Ukraine war continues to intensify,” Walid Kudmani, an analyst with XTB Market, said to Bloomberg.
CoinMetrics data also revealed a significant increase in addresses that hold at least 1,000 BTC. This is often referred to as “whales” in the crypto industry. Their number increased from 2,127 on February 27, to 2,266 by Feb. 28.
Bitcoin addresses that have a balance of more than 1K BTC Source: CoinMetrics and Messari
To 25bps, or not to 25bps
Raphael Bostic was the president of the Federal Reserve Bank of Atlanta and he supported a 25-bps rate increase at the Federal Open Market Committee meeting at the end of February. He also stated that he could consider a 50-basis point move for March if he saw inflation higher than expected.
Related: Two key indicators from derivatives indicate that Bitcoin traders expect BTC will hold $40K
Nick, an Ecoinometrics analyst, argues that the Fed has been forced to take a risk by the Russia-Ukraine crises. He explained that inflation is likely to rise due to higher oil prices. A too aggressive rate increase in March could lead to the stock market crash.
He wrote, “Inflation has reached such a high level that we can probably afford to see the stock market drop all the way to -20%.”
“But below that they’ll need to call back tightening or risk a multiyear bearish market . Of course, that’s not good news for Bitcoin.com. You should do your research before making any investment or trading decision.