Bitcoin (BTC) extended its gains, almost reaching $45,000 on March 1, as interest rate speculators reduced their bets on aggressive rate hikes in 2022 and the number of whale addresses spiked amid speculation that BTC is proving to be an apolitical haven.
Traders cut half-point bets for March
BTC price surged more than 4% to nearly $45,000, a day after posting its biggest daily rise since February 2021 as the wave of sanctions on Russia, including banning the country from accessing the global banking system SWIFT raised concerns about its impact on global growth and inflation.
For example, swaps tied to the mid-March Fed meeting anticipated a 24.5 basis point (bp) tightening by March 1, 2022. This indicates a 0.5 rate hike is less likely than expected. bp, which had 100% approval from interest rate traders last month.
Meanwhile, traders also lowered their expectations for the number of interest rate hikes in 2022 to five from seven a few days ago, according Lisa Abramowicz of Bloomberg, who shared the following graphic.
The repricing of the Fed’s outlook came as investor demand for safe havens, including US Treasuries and gold, soared in recent days.
Bitcoin, which had previously lost more than half its value due to fears around aggressive interest rate hikes by the Fed, also responded with a strong rally due, in part, to reports that the Russians were buying the cryptocurrency to circumvent international sanctions.
“Bitcoin saw a significant move to the upside today as it appears to have slightly regained its safe-haven status as the conflict between Russia and Ukraine continues to escalate,” Walid Koudmani, an analyst at XTB Market, told Bloomberg.
Data provided by cryptocurrency research firm CoinMetrics also showed a significant spike in the number of addresses holding at least 1,000 BTC, typically considered “whales” by the industry. His number went from 2,127 on February 27 to 2,266 on February 28.
To raise or not to raise 25 points, that is the question
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, favored a 25 basis point hike in interest rates at the Federal Open Market Committee meeting in late February. However, he also said a higher-than-expected inflation reading could make him “consider a 50 basis point move for March.”
But Nick, an analyst at Ecoinometrics, argues that the crisis between Russia and Ukraine has forced the Fed onto shaky ground. With inflation likely to remain higher due to rising oil prices, he explains, too aggressive a hike in March could send the stock market crashing.
“Inflation is so high that we can probably afford a stock market drop of up to -20%,” he wrote.
“But below that, they will have to call tightening again or risk a multi-year bear market. […] Of course, that’s not good for Bitcoin.”
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