Bitcoin rises as banking turmoil and uncertain economy spur renewed interest in cryptocurrency ahead of FOMC meeting
Bitcoin (BTC) and other cryptocurrencies will be closely watched by investors as the Federal Open Market Committee (FOMC) meeting take place on Wednesday. On Tuesday, BTC rose by 2.8% over the past 24 hours, trading at around $28,899. The boost in price came as shares of two regional banks, Los Angeles-based PacWest Bancorp (PACW) and Phoenix-based Western Alliance Bank (WAL), tumbled 27% and 15%, respectively, following the recent failure of four U.S. banks, including First Republic Bank. The cool jobs data also contributed to the rise in BTC's price, suggesting a weakening economy and potential inflationary pressure.
In contrast, U.S. stocks tumbled, with the S&P 500 closing 1.16% lower, the Dow Jones Industrial Average tumbling more than 300 points, or 1.08%, and the technology-heavy Nasdaq Composite dropping 1.08%. Government bonds also slumped, with the yield on the 10-year note down to 3.4%, and the two-year note yield falling to 3.9%. The failure of First Republic Bank and concerns about the financial industry contributed to the downturn in stocks.
Investors are closely waiting for the outcome of the FOMC meeting, which is expected to be announced on Wednesday. The Fed is widely expected to raise rates by a quarter point, and investors will be watching to see if Fed Chair Jerome Powell gives any hints of what's to come at the central bank's June meeting. There are differing opinions among experts regarding the Federal Reserve's upcoming decision. Some are speculating that the central bank will continue with its hawkish approach and indicate a hike in June, while others predict that the Fed will hold off on raising interest rates and not reduce them until the end of the year.
The outcome of the FOMC meeting and the labor market's performance will be closely watched by investors. According to recently released economic data from the Bureau of Labor Statistics, job openings in March dropped to 9.6 million, falling short of economists' projected 9.7 million. In addition, the quit rate decreased to 2.5%, and layoffs increased to 1.8 million, indicating that the tightening of policies is beginning to impact businesses' labor demand as intended.
Additionally, Treasury Secretary Janet Yellen's comments about the government running out of funding to pay its bills by the beginning of June if Congress fails to raise the debt limit weighed on stocks. Overall, investors will be keeping a close eye on the FOMC meeting's outcome and its potential impact on the financial industry and cryptocurrencies like BTC.