The US Federal Reserve has continued its streak of quantitative easing, by pouring in funds to uphold the confidence that liquidity won’t dry out. The latest sum, $104 billion, is almost close to Bitcoin’s loss-adjusted market valuation.
Tuur Demeester, founding partner at Adamant Capital, and Bitcoin proponent commented on the Fed’s latest liquidity injection.
$104B in QE just today… that’s 87% of Bitcoin’s loss adjusted market cap. https://t.co/46Tlzdyv1A
— Tuur Demeester (@TuurDemeester) October 18, 2019
Fed Comes to the Rescue for Short-Term Liquidity
The Fed has issued a series of overnight or longer-term facilities, putting securities on its balance in exchange for fiat. This increases the available funds for commercial banks and is supposed to give confidence that liquidity and interbank payments won’t dry out. For the crypto community, this is a case of “creating money out of thin air.”
Currently, the Bitcoin market cap at prices of $7,966.14, is above $140 billion, a sum that has been injected as overnight repo facilities in just two days this October. The Fed has performed a series of operations to prevent a liquidity panic.
The recent short-term injection is part of a series of interventions that followed a repo facility crisis in September. Due to very conservative requirements for banks to hold cash or highly liquid reserves in case of high stress, banks struggled to fill up their resources. This anomaly led to overnight rates shooting up to as high as 10% annualized.
The source of the crisis may have been the actions of J.P. Morgan, which reduced the cash it held with the Fed by 57% since June. The investment bank was flush with cash,