The current state of the cryptocurrency market seems to be very unstable. With banks collapsing, stablecoin de-pegging, and the Fed raising interest rates, there is turmoil everywhere. The year began on a positive one, and everyone believed that the market was recovering from the influences of 2022, but things now appear to be rapidly declining.
What are the regulators doing in response to all this mayhem is the question on everyone’s mind. Following the fall of the Silicon Valley Bank, President Joe Biden of the United States has vowed to penalize those accountable while assuring the public that their deposits remain secure.
What comes next? Is the situation going to improve or worsen?
Goldman Sachs change predictions
Goldman Sachs analysts have altered their forecast for the upcoming Federal Reserve meeting in the United States, noting that they no longer expect a rate hike. This shift in forecasting is attributable to recent stress in the banking sector, which has created significant uncertainty about the path of future rate hikes beyond March.
In a recent tweet, investor Pomp has mentioned about the most recent predictions of Goldman Sachs. It was said that Goldman Sachs is now predicting that the Fed will not hike interest rates in March due to the stress in banking institutions and that it would be a historic change of strategy for a central bank who have struggled with predictability in recent years.
The company had previously anticipated a 25 basis point rate increase from the Federal Reserve. The Federal Open Market Committee raised the federal funds rate by a quarter percentage point last month, to a target range of 4.5% to 4.75%, the highest since October 2007.
Leaving aside March, Goldman Sachs economists added that they still anticipate 25 basis point hikes in May, June, and July.
Similar to 2008?
The relief measures announced on Sunday, according to Goldman Sachs experts, fall short of those taken during the 2008 financial crisis. While the Fed established a new Bank Term Financing Program to support institutions harmed by market volatility following the SVB loss, the Treasury classified SVB and Signature as systemic risks. Although they fall short of the FDIC’s 2008 guarantee of uninsured accounts, both of these measures are anticipated to boost depositor confidence.
Not everyone is on the same page
Not everyone shares Goldman Sachs’ perspective. In a recent interview with Bloomberg, Mohammed Apabhai, Head of Asia Trading Strategy at Citigroup Global Markets, expressed his opinion that the SVB debacle will not prevent the Fed from raising interest rates. He went on to say more, saying,
“In my view, no. The reason why is that we’ve been doing a lot of work, as you can imagine, about whether there is any systemic risk that there is coming through here. Doesn’t really seem like it is.”
Just a few days ago the Fed announced that they plan to continue remaining very hawkish as they believe a tougher stance is required to combat inflation. However, back then SVB had not crashed yet.
Could the SVB collapse change the stance of the Fed on rising interest rates? Would it get delayed as said by Goldman Sachs or would it not be affected by the SVB collapse?