Weekly Market Update - March 24 2023

What Happened This Week? Bitcoin $BTC and ether $ETH hit 2023 highs this week, as the Fed raised interest rates but signaled a coming pause given continued banking woes.

Takeaways: Banking woes continued as UBS bought rival Swiss bank Credit Suisse to stem a brewing crisis. In a coordinated action, the Federal Reserve and other central banks increased liquidity in the U.S. dollar funding markets, resulting in a boost for bitcoin (BTC) and ether (ETH) prices, which both hit 2023 highs. The Federal Reserve announced a rate increase of 25 basis points (bps), but signaled a coming pause.

UBS Buys Credit Suisse in Bid to Avoid Further Bank Contagion: Following the collapse of Silvergate, Silicon Valley Bank (SVB), and Signature, this week brought further banking turmoil as Swiss bank UBS stepped in to rescue its rival Credit Suisse for $3.25 billion USD in a bid to avoid further panic in global financial markets. The Swiss central bank is also set to provide support for the deal with a loan of 100 billion Swiss francs backed by a federal default guarantee to help support the deal.

Central Banks Join Forces to Increase U.S. Dollar Liquidity, Giving Crypto a Boost: The Fed, along with five other central banks, announced on Sunday, March 19, 2023, coordinated action to boost liquidity in U.S. dollar funding markets. This marked an important shift in market conditions and signaled a possible end to the quantitative tightening which has been a major headwind throughout the past year.

The news helped to push bitcoin (BTC) and ether (ETH) higher at the start of the week, both reaching new YTD highs of ~$28.9k USD and ~$1,846 USD respectively. Prices then consolidated in the build up to Wednesday’s highly-anticipated Federal Open Market Committee (FOMC) meeting, with interest rate expectations changing dramatically over the past few weeks.

Fed Raises Rates Again, But Signals a Potential Pause: Despite the recent bank failures and growing concerns around the banking sector, the Federal Reserve announced a 25 bps rate increase at the latest FOMC meeting on Wednesday, as they push ahead in their fight to tame inflation. The FOMC, however, signaled that rate increases may be coming to an end, depending largely on incoming data. The latest Fed dot plot, which outlines interest rate expectations from Fed officials, suggests only one more 25 bps hike is likely this year.

Federal Reserve Chair Jerome Powell highlighted during a Wednesday news conference that the Fed had considered a pause in rates due to the recent banking crisis, but unanimously chose to raise rates given inflation data and the strength of the labor market. At the news conference, Powell stated “if we need to raise rates higher, we will,” which markets received as more hawkish than expected in light of the recent stress across the banking sector. This led to all the major U.S. indices sliding lower into the close, and crypto prices pushing lower too.

Bitcoin Takes Mild Dip Following Rate Increase, But Remains Strong: Bitcoin (BTC) faced strong resistance throughout the week at the ~$28.4k USD level, before briefly touching below $27k USD following the Fed's latest policy decision. However, Bitcoin remains the main focus among crypto with Bitcoin Dominance reaching another year-high of 47.8%.

XRP Has Strong Week, and Arbitrum Airdrops Token: In altcoin news, XRP was among the biggest gainers this week, with its price increasing by over 20% at one point as investors grew more confident that a ruling in the long-running court case between the SEC and Ripple would resolve in their favor, following a supplemental notice submitted by Ripple on Monday. The outcome of the case is being closely watched by many, as a positive result for Ripple could set a crucial precedent for crypto.

Arbitrum, one of the largest Ethereum Layer 2s, with nearly $2 billion USD in total value locked (TVL), launched a token airdrop on Thursday, with 11.5% of the total supply going to eligible Arbitrum users and 1.1% to DAOs that operate on the Arbitrum ecosystem. The token will be used for governance relating to Arbitrum One and Arbitrum Nova.

Read more about this and our topic of the week, interest rates.

See you next week.

Onward and Upward!
Team Gemini

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