March An Important Month for Cryptocurrency Industry
March is shaping up to be a crucial month for crypto, with significant events lined up in the month that are predicted to influence prices. For smart crypto investors, understanding these events' potential effects is key, in order to be prepared for any volatility. In this article, I will discuss the main events to note and their possible impacts.
The Federal Reserve's program for reducing its balance sheet ends on March 12th
This program started in 2007-2008, during the worldwide money crisis. The Fed used something called "quantitative tightening". This let them slowly sell Treasury bonds and securities backed by mortgages. They had collected these after bringing interest rates close to zero during the global money crisis.
Each month, the Fed made sure that some amount of these bonds and securities were removed from its balance sheet, without reinvesting the proceeds. By late 2018, the Fed's balance sheet dropped to about $3.8 trillion. When COVID-19 came, they stopped the program.
In April 2020, the Fed's balance sheet shot up to $8.9 trillion. That included $2.2 trillion in cash, $2.5 trillion in RRP, $760 billion in TGA, and $3.1 trillion in reserves. Its total debts added up to $7.7 trillion on January 24, 2024. To help the economy, the Fed used even more special measures.
On March 12th, the Fed will be talking about how fast it'll lower the balance sheet. That could change how much money is available in the financial markets. If they do it faster, long-term rates might go up.
The US Releases February CPI Data on March 12th
The January CPI reading of 7.5% was the highest inflation rate in 40 years. Core inflation, which excludes volatile food and energy prices, rose 7% year-over-year. Rising prices are hurting consumer spending power. February's CPI will reveal if inflation is stabilizing or rising further. If inflation remains high as always, the outcome could be a further raise in rates at a faster pace. This can affect risk assets, including crypto, negatively.
ETH Dencun upgrade on March 13th
The Dencun upgrade aims to optimize Ethereum's gas fee market and transaction pricing through adjustments to base fees and priority fees. Currently, network congestion during busy periods can drive gas fees extremely high, creating friction for users.
The upgrade hopes to alleviate this issue and improve the overall user experience. However, any unexpected bugs or glitches during the software upgrade process introduce risks of temporary network congestion, outages or other issues that create price volatility if they shake investor confidence in Ethereum. A smooth upgrade would boost ETH prices.
First Meeting of FTX Digital Creditors on March 15th
FTX Digital Markets is tied to the failed crypto exchange FTX, which declared bankruptcy in November due to about $1 billion customer shortfall. [This first meeting between FTX and its creditors, which include other companies and individual customers awaiting their money, will begin shedding light on the bankruptcy procedures and possible recovery chances. However, unwinding FTX's assets and liabilities is a complex legal process that could take years, maintaining an overhang on crypto markets.
NVIDIA Annual GPU Technology Conference on March 18th
In past conferences, NVIDIA has announced new crypto mining-specific processors and technologies. As the largest manufacturer of GPUs that are widely used to mine Ethereum and other proof-of-work blockchains, any guidance provided by NVIDIA on its product roadmap for blockchain applications could signal whether the company sees ongoing demand and viability for crypto mining over the long run. This in turn may impact prices of coins like ETH that are currently mined.
Federal Reserve's Interest Rate Decision on March 20th
The market is pricing in at least a 05.25% hike in the target fed funds rate range, which would put the upper limit at 5.50%. However, some analysts believe the Fed may again held rates steady at 5.25-5.50%, given inflation has remained stubbornly high. The Fed's tone on the outlook and any clues about the expected path for rates over the coming months will also be important signals watched closely by all investors and impact risk asset prices.
Ripple Faces SEC's Initial Legal Claims on March 22nd
Ripple has been slapped with a lawsuit by the SEC. They're accused of selling XRP, which wasn't registered as a security. The commission's opening brief will present pivotal arguments. It seeks to clarify whether XRP should be classed as a security under their legal interpretation. The case has wide-reaching implications for the crypto industry as it could set legal precedents determining how other coins are classified.
Trial of SEC v Do Kwon Begins on March 25th
Do Kwon, TerraUSD's founder, will undergo a trial in South Korea. The purpose is to discover if he's guilty of fraud connected to the failure of his stablecoin. This event shook the global crypto market. The result might impact how regulators look at algorithmic stablecoins.
Sentencing for Sam Bankman-Fried, March 28th
FTX's brainchild, Sam Bankman-Fried, is under hot water with accusations of fraud and money laundering. These charges trace back to the fall of his crypto exchange, FTX, in November 2022.
[His first sentencing hearing is set for March 28th in a U.S. federal court. The outcome will begin to provide legal resolution and accountability for his role in FTX's collapse. It may also offer clues about potential plea deals or the severity of penalties he faces, providing more certainty to an event that rocked the crypto world. The hearing could therefore impact overall market sentiment.
Conclusion
March is chock-full of big events. This means a bumpy ride for crypto prices is likely. People trading or investing should get ready for possible price changes. These changes could come as the news from each event shapes how people feel about risk and the market.
Predicting prices in the short term can be hard. Still, more people using blockchain and better rules over time suggest a bright future for crypto. For those with a long term view, periods of volatility can be good. They can allow for getting quality digital assets at better prices. In summary, March is a key month. It could guide where the crypto industry goes for the rest of 2024 and more.
The article was first posted on Hive on my profile.
