What Billions in Fed Repo Injections Reveal About the Promise of Bitcoin

What Billions in Fed Repo Injections Reveal About the Promise of Bitcoin

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative. The following article originally appeared in CoinDesk Weekly , a custom-curated newsletter delivered every Sunday exclusively to our subscribers. ————— Last week, the Federal Reserve injected $278 billion into the securities repurchase, or “repo,” market over four days, all so that banks could meet their liquidity needs. It was the first time the Fed had intervened in this vital interbank market, where banks’ pawn financial assets to fund overnight cash needs, since the financial crisis of 2008. Fed officials and bankers dismissed the rare liquidity breakdown as a hiccup stemming from a series of coincidental factors in bond markets and corporate tax payments. It wasn’t a very comforting explanation, not when other economic warning signs are flashing, too: $17 trillion in bonds worldwide showing negative yields; a worsening U.S.-China trade war; and manufacturing indicators signaling an impending global recession . Predictably, certain crypto types have viewed this alarming scenario with glee. More than a few HODLing tweeters responded to the repo story with two words of advice: “buy bitcoin.” But it’s actually hard to predict what all this means for crypto markets, at least in the short- to medium-term. If and when a 2008-like financial panic takes hold, will bitcoin rally as a new kind of uncorrelated “safe haven” or will it decline in a broad-based “risk-off” dumping of all things speculative? (Notwithstanding a sharp dip and […]

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