Liquidity Rises as Governments Flood the Financial System!

Summary

The video discusses the global banking crisis, with the Federal Reserve's rapid interest rate hikes causing instability. It highlights Bitcoin's surge and the potential for a short-term retracement, while emphasizing the cryptocurrency's long-term value against a backdrop of government spending and inflation. The script also touches on the possibility of a central bank digital currency (CBDC) and its implications amid economic challenges.

Takeaways

• 🌐 The global banking system is facing a crisis, with governments attempting to stabilize it with temporary solutions.
• 📈 The federal funds rate has seen the fastest increase in history, rising from 0.25% to 4.75% since January 2021, a 1,800% increase from its previous value.
• 💸 Bitcoin has experienced significant growth, with a 70% pump so far in the year, and speculations about its future value reaching a million dollars.
• 💹 Despite the banking crisis, there is an influx of liquidity returning to the markets, as indicated by the Federal Reserve's balance sheet increasing by $300 billion.
• 🏦 Credit Suisse's attempt to borrow 54 billion dollars was overshadowed by UBS's acquisition of the bank for 3.2 billion dollars, signaling further instability in the banking sector.
• 📉 More than 186 U.S. banks are at risk of collapse, according to an article by Cointelegraph, indicating a widespread issue within the financial system.
• 💔 The Federal Reserve's new backstop plan to inject up to two trillion dollars into the system may not be sufficient to address the economic challenges.
• 🇨🇳 China's surprise rate cut to boost banking liquidity and economy, following the reopening from the COVID-19 crisis, adds another layer to the global economic situation.
• 💼 The U.S. government's spending plans, aiming for 6.9 trillion dollars next year and 10 trillion by 2033, coupled with tax increases, may not be sustainable in the long term.
• 📊 A potential bearish divergence in Bitcoin's price chart suggests a possible short-term retracement to the 50 Fibonacci level, which could cause panic among investors.
• 🚀 Despite short-term fluctuations, the long-term outlook for Bitcoin remains positive as the traditional financial system faces devaluation and economic challenges.

Q & A

What has been the recent trend in the federal funds rate since January 2021?

The federal funds rate has increased from 0.25 percent to 4.75 percent, marking an increase of 4.5 percent.

How does the current increase in the federal funds rate compare to historical rates?

This is the fastest increase in history, with the rate rising by 1800 percent from its previous level, which is unprecedented given the low starting point.

What impact has the rapid increase in interest rates had on banks?

The rapid increase in interest rates has led to banks collapsing, indicating a significant strain on the banking system.

How has Bitcoin performed in the context of the banking tsunamis?

Bitcoin has seen a pump of nearly 70 percent so far this year, suggesting it might be benefiting from the instability in traditional banking.

What is the significance of the two million dollar bet on Bitcoin reaching a million dollars?

While the bet is unlikely to happen, it highlights the speculative interest in Bitcoin and the belief in its potential for significant appreciation.

What does the increase in the Fed's balance sheet signify?

The increase by about 300 billion dollars in the Fed's balance sheet in the past week erases the progress made over the past four months, indicating ongoing quantitative easing.

What is the potential implication of the UBS acquisition of Credit Suisse?

The acquisition suggests further consolidation in the banking sector and potential systemic risks, as Credit Suisse was unable to sustain itself with a 54 billion dollar loan from the Swiss Central Bank.

How many U.S banks are reportedly at risk of collapse according to Cointelegraph?

More than 186 U.S banks are well positioned to collapse, indicating a widespread vulnerability in the banking system.

What measures is the Federal Reserve considering to address the banking crisis?

The Fed has put together a new backstop with a scope to inject as much as two trillion dollars into the system to stabilize the banks.

What is the potential impact of China's surprise rate cut on global financial markets?

China's rate cut aims to boost banking liquidity and their economy post-COVID, which could have ripple effects on global markets as they try to get ahead of economic challenges.

What is the government's spending plan for the next few years, and how does it relate to the national debt?

The president aspires to spend around 6.9 trillion dollars next year and 10 trillion dollars by 2033, which, combined with the current national debt of 31 trillion dollars, raises concerns about how this debt will be serviced with rising interest rates and potential recession.

How does the recent discovery of a large gold deposit in China affect the value of gold?

The discovery of a gold deposit valued around three trillion dollars adds to the supply of gold, potentially devaluing each ounce of gold worldwide.

What is unique about Bitcoin's supply compared to gold?

Unlike gold, Bitcoin has a capped supply of 21 million coins, ensuring that no more can be created or found, providing a hedge against inflation.

What technical indicators suggest a potential short-term retracement in Bitcoin's price?

A bearish divergence forming on the four-hour chart, with lower highs on the RSI and higher highs on the price, along with a possible rising wedge, suggests a short-term retracement to the 50 Fibonacci level at about twenty-four thousand dollars.

What upcoming events could influence Bitcoin's price movement?

The debt ceiling limit deadline in July and the Federal Reserve's confirmation of a July launch for its FedNow instant payment service, which is a CBDC, could coincide with market movements and potentially influence Bitcoin's adoption and price.