Bitcoin now accounts for more than 45% of the total market cap of all cryptocurrencies, which is now back above $1 trillion after BTC surged 27.5% in the past seven days.
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The string of crypto-friendly bank failures in the past two weeks may have been terrible for crypto as a whole, but it's done wonders for Bitcoin's price.
Bitcoin now accounts for more than 45% of the total market cap of all cryptocurrencies, which is now back above $1 trillion after BTC surged 27.5% in the past seven days.
The world's biggest cryptocurrency is now trading above $28,000 — despite global markets being rattled by the collapse of Silvergate, Silicon Valley Bank and Signature.
It's also been confirmed that Credit Suisse is being snapped up by its rival UBS in a cut-price deal that's designed to prevent further contagion from sweeping the banking sector.
Meanwhile, U.S. bank regulators had to arrange for a group of large banks to rescue the 14th-largest bank in the U.S., First Republic, by depositing $30 billion as a show of faith.
And generally speaking, what's bad for traditional banks is good for crypto in general and Bitcoin specifically.
Banks Wobble
One answer is that with so much financial instability, the Federal Reserve will have to pause interest rate hikes — making riskier investments more attractive.
"An environment where higher interest rates after a period of hyper-low interest rates are creating bank runs is about as perfect a Bitcoin use-case as one can think," Stephane Ouellette, CEO institutional crypto advisory firm FRNT Financial, told Bloomberg.
It's not just the banking wobbles, however.
The Consumer Price Index is in line with expectations that inflation is rising more slowly than it had, which would also push the Fed to pause interest rate hikes, digital asset manager CoinShares' head of research, James Butterfill, told Reuters earlier this week.
That "has been very supportive for interest rate sensitive crypto assets such as Bitcoin," he said.
Another is that with the traditional centralized banks wobbly, BTC — which was designed as an alternative to those banks, becomes more attractive. Particularly to the crypto faithful.
"The current turbulence within the US banking sector, potentially leading to a more relaxed Federal Reserve stance, reinforces Bitcoin's dual role as a hedge against traditional finance and a credible risk asset," Kunal Goel, an analyst at digital asset intelligence firm Messari, told Yahoo Finance.
'It's Different This Time'
According to the software engineer and crypto trader Eric Wall, "this is the only time over the past few years where we've had a clean price/narrative coalition." On Twitter, he argued that Bitcoin's latest surge cannot be compared with its performance during the early days of the coronavirus pandemic — nor the war in Ukraine. He wrote:
"The market signal is clear and undeniable, with Bitcoin decoupling from all other assets, even outperforming its own riskier crypto counterparts. Bitcoin is — seemingly for the first time — working as a safe haven asset in response to the traditional banking system and in response to a globally unreliable and jerky central bank monetary policy."
