US Fed’s BTFP Closes on March 11, Financial Sector in Crisis

• The US Fed’s Bank Term Funding Program (BTFP) is expected to close its services on March 11.
• Analysts anticipate a potential banking turmoil following the cessation of the Fed’s BTFP.
• All asset classes including cryptocurrencies will experience a tough transition period.

Amidst anticipations of the US Federal Reserve’s Bank Term Funding Program (BTFP), the community speculates a potential banking turmoil. While Monday marks the conclusion of the Fed’s BTFP, researchers anticipate a renewed financial crisis in the banking sector similar to last year’s debacle.

On March 15, 2023, the Fed’s Board of Governors announced the launch of BTFP to “support American businesses and households by making additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their deposits.” The launch came following the fall of financial giants like Silvergate Bank and Signature Bank.

However, on February 20, 2024, the Fed declared that the BTFP would cease making new loans from March 11. Geiger Capital, a prominent voice in the financial sector, recently shared insights on the impending financial crisis following the cessation of BTFP. Adding that the New York Community Bancorp (NYCB) is collapsing, he stated, “Many regional banks are still in a terrible situation and the Fed is ending their BTFP bailout.”

Crypto analyst Furkan Yildirim took to X to caution against potential banking chaos. He also shared insights on a “more lenient monetary policy” that could be adopted by the Fed to stabilize “asset prices and prove beneficial for Bitcoin and the broader market.” He added,

With the BTFP’s end, banks may face liquidity constraints impacting their operations and profit margins. This could slow down economic growth due to reduced lending.

In addition, BitMEX founder Arthur Hayes predicted a severe market correction following the BTFP closure. He asserted that it would result in a rough transition period for all asset classes, including cryptocurrencies. He added, “The market could face a harsh reality check without new dollar liquidity injections.”