The U.S. Banking System was in a pickle when the Silicon Valley Bank’s Collapse caused a deafening cacophony across the world, affecting Signature Bank, First Republic Bank, Credit Suisse Bank, and innumerous more. But as a spark in the embers, cryptocurrency has been gaining momentum with Bitcoin’s trough-to-peak price rallying up 45 percent since the crumble of multiple-vaunted global banks.
As the financial system prerogative goes – the adjacency of the SVB Collapse battering shares of First Republic made investors nervous about the extent of the banking crisis, leading to expending money into crypto and boosting the propel of Bitcoin’s price.
When SVB was poised to go into FDIC receivership, the Bitcoin price whipsawed from $19,600 to $20,000. And since the fateful week, the price of Bitcoin has been dominating and surging, rising over to $28,204. The oscillation of Bitcoin price is attributed to the current liquidity crisis faced by the banking sector and the long-term trend of accumulation during dips.
Federal Reserve Chair Jerome Powell insinuated that the price of assets is deeply ingrained in people’s expectations of inflation.
“People’s expectations of inflation does have a real effect on inflation.”
Apparent weaknesses during the tenure of poor risk management triggered the Silicon Valley Bank run, Signature Bank’s failure seems ambiguous between cryptocurrency and leadership crisis, and 11 Wall Street banks injected $30 billion to rescue First Republic Bank. Investors and depositors, wary of the warnings of the pestilence of bank collapses causing a risk of 186 bank failures, quickly started withdrawing funds.
Other risk disclosure stresses to the broader banking system due to rising interest rates were exacerbated by UBS’s critical decision to buy back debt after the Central Bank’s rescue of Credit Suisse, and quite telling about saving competitors over contagion fears. The only winner here seems to be the Bitcoin price.
Crypto analysts are drawing parallels between the reason for this disguised blessing for Bitcoin price to the 2013 Cyprus crisis that highlighted cracks in the fractional reserve system and sinewed Bitcoin’s decentralized and censorship-immune nature to the limelight. Although, much cannot be said about the volatility of cryptocurrency with the effect of the FTX Bankruptcy on crypto regulations.
Nearly $100 billion has been pumped into the crypto market in the past week with Ethereum, Bitcoin, and Altcoins soaring like the sky’s the limit. With the future of cryptocurrency swinging in calamity in the recent past, headlines like these provide relief to staunch crypto-believers.
Amidst all the market turbulence, the Bitcoin price reflects on the liquidity conditions and the real rates of the financial market and with the decline of real rates, the liquidity chances have improved leading to a potential new regime of the Bitcoin reign. Bitcoin’s market capitalization in contrast to the rest of the crypto market reached a nine-month high of 45.5 percent.
The vulnerability and present predicament of the banking system fuels the advantage of everyone hailing crypto as the answer to financial troubles. Cryptocurrency is also buoyed by rising expectations that the central banks in the U.S. will rein in further interest rate hikes.
“An environment where high-interest rates after a period of hyper-low interest rates are the cause behind bank runs is the perfect premise for Bitcoin to rise.”
All the reasons for swinging up Bitcoin immensely the previous week attune to the systematic global banking risks, stablecoins in crypto, and the call for the Federal Reserve to pull back rate hikes. If there’s one thing that’s clear – Bitcoin will never wane.
