Fed liquidity injections drive down US Treasury yields, but not Bitcoin price
Bitcoin (BTC) might have shown strength after successfully defending the $28,000 support amid unfounded rumors regarding Binance, but an interesting development to note is BTC is becoming less correlated to traditional markets after the U.S. Federal Reserve elected to provide emergency liquidity to banks.
This change in attitude from the central bank has caused a shift in the trajectory of US Treasuries as traders sought refuge from the inflationary upward pressure. Bitcoin appears to be agnostic to the movement and its price has been hovering around $28,000 for the past week.
Meanwhile, the yield on the 5-year note fell to 3.50% on April 3, a drop from 3.70% in the previous week. Higher demand for debt instruments reduces payout, resulting in a lower yield. The $152.6 billion in outstanding borrowings from the U.S. Federal Reserve's backstop lending program has been the driving factor.
The general public's lack of trust in banks has also caused them to reconsider what the Federal Deposit Insurance Corporation (FDIC) is and how the Fed no longer controls the inflation trajectory. The question of whether Bitcoin can serve as a reliable store of value during a crisis remains open, but the 70% year-to-date gains certainly demonstrate a point.
According to data from Bank of America, the total assets of money market funds in the United States reached a record high of $5.1 trillion. These instruments invest in short-term debt securities such as the U.S. Treasuries, certificates of deposit and commercial paper. Furthermore, fund manager and analyst Genevieve Roch-Decter, CFA, states that investors have withdrawn $1 trillion from banks because money market funds offer a much higher return.
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