Bitcoin Could Continue Rally Amid Intensified Banking Crisis, Here’s Why
While the US banking crisis seems to be getting worse by the day, the cryptocurrency market, including Bitcoin (BTC), has reacted to it in a positive manner. In recent weeks, BTC has risen by almost 40% despite the condition of the financial sector.
According to a recent report by economists using analysis from the now bankrupt Silicon Valley Bank (SVB), more than 186 banks are prone to collapse after the fall of SVB. According to the report, Silicon Valley Bank had a capitalization greater than 10% of existing banks.
However, analysts found that 10% of US banks currently have more unrecognized losses than SVB, meaning the banking crisis is likely to intensify in the coming months. Even so, Bitcoin’s continued recovery has proven to be inevitable amidst this crisis.
Why Bitcoin May Rally Continue?
Although the reason behind a bitcoin rally in the midst of a banking crisis can be quite apparent, as the relationship between the two is not necessarily causal or predictable. However, several potential factors are still worth noting as most traders are still confused as to whether this is a “bull run” or another potential “bull trap”.
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Bitcoin has always been a decentralized asset that operates independently without traditional banking systems. This means that cryptocurrency is not subject to the same regulatory or monetary policies as fiat currencies, and its value is determined by market demand rather than government intervention.
A time of financial uncertainty like what happens to US banks is when some people may see cryptocurrencies like Bitcoin as a safe haven for their assets. With big banks like SVB, Silvergate and subscription bank being one of the first to open the floor of the banking crisis, traditional bankers can continue accumulating BTC, therefore, increasing its price.
Vijay Ayyar, Vice President of Corporate and International Development at Crypto Exchange Luno counted CNBC “If we look at the history of Bitcoin and why it was created in the first place, it was precisely for events like this that the current system shows signs of weakness and therefore owning an uncorrelated asset helps.”
BTC Against Gold
Gold was once seen as an uncorrelated asset in times like these. However, with the rapid adoption and decentralization of Bitcoin, as well as the world going digital that even BTC is being dubbed “digital gold”, people have started to see crypto king as a nicer alternative to gold.
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Since the start of the year, gold has only added around 9% to its value, unlike Bitcoin, which has gained over 70% of its value since January. Interestingly, it’s worth noting that even during this ongoing banking crisis, bitcoin it is still seen as the biggest gainer among other cryptocurrencies.
Bitcoin is up nearly 30% in the past week, moving from a low of around $19,000 to a nine-month high on Monday morning with a price of $28,509.
Ethereum (ETH) which is the second largest cryptocurrency by market capitalization, however, it has seen less gains compared to BTC. ETH is up just 13% in the last 7 days.
“As this banking crisis develops, it will be interesting to continue watching Bitcoin price action as more and more people think of owning Bitcoin as a smart alternative to the current system,” concluded Ayyar.
Unsplash featured image, TradingView chart