Bitcoin Price Teeters On Brink Of Dropping Below $28,000 Post Labor Day
Bitcoin price suffered a setback today, May 2, when its price dropped below the crucial $28,000 level after a solid four-month run.
Throughout April, the alpha coin was on an upward trajectory, experiencing its longest period of back-to-back monthly gains since 2021.
However, the latest drop in Bitcoin’s value raises questions about the sustainability of its recent surge, leaving investors wondering if this is just a minor hiccup or the start of a more significant market correction.
Bitcoin price loses $28,000
Bitcoin has experienced a 2% drop in the last 24 hours, and its value, as reported by CoinMarketCap, dropped below the $28,000 level and is currently at $27,974. Furthermore, its 2.17% increase over the past seven days indicates Bitcoin’s ability to weather market fluctuations and remain stable.
Source: CoinMarketCap
However, Bitcoin’s recent 73% rally since the cryptocurrency market crash of 2020 stalled near the $30,000 level, leaving traders anxiously waiting for new catalysts to boost the cryptocurrency’s value.
This rally was driven by the belief that the US Federal Reserve will eventually adopt a looser monetary policy and the argument that the US banking crisis has eroded confidence in fiat currency.
“The market is very nervous as it waits to see what happens to First Republic Bank,” Adrian Przelozny, head of cryptocurrency exchange Independent Reserve, told Bloomberg.
Image: India Posts
Banking crisis in the First Republic raises fears
The collapse of Silicon Valley Bank (SVB) and Signature Bank due to massive withdrawals has caused alarm among investors and depositors, who now fear that First Republic Bank could be the next institution to fail.
In recent weeks, the bank’s wealthy depositors have been shifting their funds to larger, more established institutions that are considered less prone to collapse.
According to Wall Street JournalFirst Republic Bank depositors have withdrawn approximately $70 billion since the collapse of SVB earlier this month, raising concerns of a possible run on deposits.
The bank’s high unsecured deposit rate of 68% has added to investor anxiety as this exceeds the FDIC’s $250,000 limit, leaving a significant portion of the bank’s funds at risk.
While federal regulators stepped in to protect SVB’s unsecured deposits because of the systemic risk they posed to the financial system, First Republic depositors are unwilling to take the same risk, fearing that their funds will not receive the same level of protection.
As a result, the bank risks a massive withdrawal of deposits, which could lead to its collapse and send shockwaves through the financial sector.
BTC / US Dollar at $28,023 on the daily chart at TradingView.com
Historical data: potential for continued Bitcoin price growth
Meanwhile, according to data compiled by Bloomberg, Bitcoin price’s recent four-month winning streak through April marks the longest period of gains since the six-month breakthrough through March 2021.
Over the last decade, four-month winning runs on Bitcoin have historically been associated with an average increase of 260% over the next year, indicating the cryptocurrency’s potential for sustained growth.
This historical data provides a glimmer of hope for investors who have been eagerly waiting for Bitcoin’s value to recover after its recent decline.
-Featured image from Freepik