US Bank Run: The banking stocks slid on the FOMC interest rate decision day as the Federal Reserve kept the fund rate unchanged at a 23-year high of 5.25%-5.5%. Despite turning down the possibility of any rate hike, Chairman Jerome Powell stated that the central bank is not ready to reduce interest rates in March.
The selling pressure on U.S. bank stocks increased after New York Community Bancorp’s (NYCB) stock tumbled 38% to close at $6.47 after it cut its dividend and posted a loss, reigniting fears of a banking crisis. CEO Thomas Cangemi said the bank holding company New York Community Bank is adjusting to the demands of being a large bank after it acquired assets and liabilities from Signature Bank.
The KBW Regional Banking Index fell 6% to $101.99, the largest one-day drop since last year’s banking crisis due to bank runs in multiple banks including Silicon Valley Bank.
With the Fed having no plans to cut interest rates and Bank Term Funding Program bailouts (BTFP) ending in March, a bank run is likely to return to the U.S. banking industry. Small banks are still feeling the pain.
Fed Chair Jerome Powell and Treasury Secretary Janet Yellen will announce a money printing soon. New York Community Bancorp’s surprise loss driven by loan loss reserves rose 10 times vs expectations.
Moreover, 10-year and 2-year US Treasury yields plunged after the FOMC, signaling the market expects some bank bailout funds to fix the bank losses. US 10-year Treasury (US10Y) returns under the 4% mark to 3.946% on Thursday.
BitMEX co-founder Arthur Hayes says BTFP and discount window won’t help as “CRE and multi-family residential loans are not eligible collateral.”
He expects Bitcoin to be volatile, but if NYCB and other banks’ stock prices continue to plunge a new bailout could come soon. Bitcoin price will rally similar to March 2023 price action.
The Fed and Treasury Department are more likely to adjust to rate cuts coming in May and June FOMC meetings. BlackRock and other banks anticipate Fed rate cuts in June as recent PCE inflation, jobs, and retail sales data show the resiliency of the US economy.
Arthur Hayes remains bullish on Bitcoin long-term price of $1 million amid the banking crisis and Bitcoin halving. He is “just waiting with my trigger finger on the buy button for a few shitcoins on my radar.”
BTC price fell 2% in the past 24 hours, with the price currently trading at $42,138. The 24-hour low and high are $41,879 and $43,717, respectively. Furthermore, the trading volume has increased by 15% in the last 24 hours, indicating a rise in interest among traders.
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