- Bitcoin has recorded a price gain of over 3% in the last 24 hours.
- Bitcoin’s rally after a week-long correction comes in the wake of fresh U.S. banking troubles.
- Experts weigh in on whether there is a correlation between bank troubles and Bitcoin’s price jump.
The United States banking sector has endured a rough start to the year, buckling under the weight of the Fed’s interest rate hike regime as at least three major banks, including Silicon Valley Bank (SVB), Signature Bank, and Silvergate Bank, failed under pressure in Q1 alone.
On the other hand, the crypto markets, led by Bitcoin (BTC), appear to have an inverse correlation with banking trouble. In the latest instance, Bitcoin has experienced a price rally amid concerns surrounding the fate of First Republic Bank.
An Inverse Correlation?
At the time of writing, Bitcoin’s price is up 3.89% in the last 24 hours, trading at $28,348.63 on mainstream exchanges, per data from CoinMarketCap.
The price jump comes after a week-long correction and coincides with the news of trouble at First Republic Bank. The crypto asset also experienced a 45% price rally following the collapse of SVB.
As disclosed in reports on Tuesday, April 25, First Republic Bank’s already battered share price plummeted by 50% as the bank reported a $100 billion drop in deposits in Q1.
The health of the bank has been shrouded in uncertainty for some time. In March, First Republic Bank required a $30 billion cash infusion from the U.S.’s biggest banks to stay afloat. In its current state, pundits believe that the fate of First Republic Bank will be decided before the weekend.
Speaking to DailyCoin about Bitcoin’s recent price action and whether it correlated to First Republic Bank’s woes, CoinShares’ James Butterfill emphasized that several factors drove Bitcoin’s price action.
“There are several things at play, the sell-off, likely prompted by the gradual expectation of a May rate hike, presented a buying opportunity for some,” Butterfill said.
“But yes, the fall in confidence of First Republic’s viability, as demonstrated by its 49% fall in its share price over the last two days, brings into question the robustness of the BTFP and is likely to have been part of the reason for Bitcoin’s price rebound.”
“Intraday price moves strengthen this hypothesis,” he added.
K33 Research’s Vetle Lunde highlighted that the first wave of bank collapses had given Bitcoin a narrative boost as a “bearer asset.” He stressed that, in addition to the narrative shift, the asset also saw buying pressure from Binance and MicroStrategy, which aided the rally.
Lunde believes Bitcoin may not react as it did in March unless there is similar buying pressure.
"While BTC saw a strong positive response amidst the banking turmoil, it's far from certain that the market will respond in similar strength if more pressure were added to regional banks," Lunde said.
Following Bitcoin’s recent price jump, Prominent crypto trader @IncomeSharks on Twitter has urged traders to secure profits at current levels as Bitcoin is at a potential resistance level.
On the Flipside
- U.S. bank collapses have posed trouble for crypto businesses that use them to store their reserves.
- USDC de-pegged as it was revealed that Circle held some of its reserves on SVB.
Why You Should Care
A flight to Bitcoin in the wake of banking fears could indicate an increased understanding of the benefits of decentralization.
For a breakdown of Bitcoin’s price action, read this:
To learn about Coinbase‘s latest advocacy effort, read this: