While the US banking crisis seems to be worsening each day, the crypto market including Bitcoin (BTC) has reacted to this in a positive manner. Over the past weeks, BTC has surged nearly 40% despite the condition of the financial sector.
According to a recent report from economists using the now-bankrupted Silicon Valley Bank (SVB) analysis, more than 186 banks are prone to collapse following the fall of SVB. Per the report, Silicon Valley Bank had a higher capitalization of more than 10% of existing banks.
However, the analysts discovered that 10% of US banks currently have more unrecognized losses than the SVB which means the banking crisis is only expected to intensify over the coming months. Even so, Bitcoin’s continuous rally has proved to be inevitable amid this crisis.
Why Bitcoin Could Continue Rally?
Though the reason behind a Bitcoin rally amid a banking crisis may be quite apparent given 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 about 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 the crypto is not subjected 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 such as the one ongoing with US banks is when some people may see cryptocurrencies such as Bitcoin as a safe haven for their assets. With major banks such as SVB, Silvergate, and Signature bank being one of the first to open the banking crisis floor, traditional bankers may just continue to accumulate BTC, therefore, surging its price.
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno told CNBC “If one looks at the history of Bitcoin and why it was created in the first place, it was precisely for events like this where the current system shows signs of weakness and hence owning an uncorrelated asset helps.”
BTC Against Gold
Gold was once viewed as an uncorrelated asset during times like this. However, with Bitcoin’s rapid adoption and decentralization as well as the world going digital that even BTC is being dubbed a “digital gold”, people have begun to see the crypto king as more of a pleasant alternative than gold.
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Since the beginning of the year, gold has only added around 9% to its value as opposed to Bitcoin which had gained more than 70% of its value since January. Interestingly, it is worth noting that even during this ongoing banking crisis, Bitcoin is still seen as the highest gainer among other cryptocurrencies.
Bitcoin has surged nearly 30% in the past week moving from a low of around $19,000 to tap a nine-month high as of Monday morning with a price of $28,509.
Ethereum (ETH) which is the second largest crypto by market cap has, however, seen fewer gains as opposed to BTC. ETH has only surged 13% in the past 7 days.
“As this banking crisis plays out, it’ll be interesting to continue to watch Bitcoin price action as more and more people think of owning Bitcoin as a clever alternative to the current system,” Ayyar concluded.
Featured image from Unsplash, Chart from TradingView