The current state of the cryptocurrency market seems to be very unstable. With collapsing banks, unpegging stablecoins and rising Fed interest rates, there is unrest everywhere. The year started off on a positive note, and everyone believed the market was recovering from the influences of 2022, but things now seem to be declining rapidly.
What are regulators doing in response to all this chaos is the question on everyone’s mind. After the fall of Silicon Valley Bank, President Joe Biden of the United States pledged to penalize those responsible while assuring the public that their deposits remained safe.
What happens afterwards? Will the situation get better or worse?
Goldman Sachs changes its forecast
Goldman Sachs analysts changed their forecast for the next Federal Reserve meeting in the United States, noting that they no longer expect a rate hike. This change in forecast is attributable to recent strains in the banking sector, which have created significant uncertainty about the path of future rate hikes beyond March.
In a recent tweet, investor Pomp mentioned Goldman Sachs’ latest predictions. It has been said that Goldman Sachs is now forecasting that the Fed will not raise interest rates in March due to stress from banking institutions and that it will be a historic change in strategy for a central bank that has struggled with predictability. these last years.
The company had previously anticipated a 25 basis point rate hike from the Federal Reserve. The Federal Open Market Committee raised the federal funds rate by a quarter of a percentage point last month, to a target range of 4.5% to 4.75%, the highest since October 2007.
Leaving March aside, economists at Goldman Sachs added that they still expect 25 basis point hikes in May, June and July.
Similar to 2008?
The relief measures announced on Sunday, Goldman Sachs experts say, fall short of those taken during the 2008 financial crisis. As the Fed established a new term bank funding program to support institutions hurt by the market volatility following the loss of SVB, the Treasury classified SVB and Signature as systemic risks. Although they fall short of the FDIC’s 2008 guarantee on uninsured accounts, both measures should boost depositor confidence.
Not everyone is on the same page
Not everyone shares Goldman Sachs’ view. In a recent interview with Bloomberg, Mohammed Apabhai, head of Asia trading strategy at Citigroup Global Markets, expressed his view that the SVB debacle won’t stop the Fed from raising interest rates. He went on to say more, saying:
“In my opinion, no. The reason for that is that we’ve done a lot of work, as you can imagine, to determine if there’s systemic risk coming through here. It doesn’t really appear to be the case.
Just a few days ago, the Fed announced that it plans to remain very hawkish as it believes a tougher stance is needed to fight inflation. However, at the time, SVB had not yet crashed.
Could the collapse of the SVB change the Fed’s stance on raising interest rates? Would it be delayed as Goldman Sachs said or would it be unaffected by the collapse of the SVB?