While the US banking crisis seems to be getting worse by the day, the cryptocurrency market, including Bitcoin (BTC), has reacted positively. In the last few weeks, BTC has risen nearly 40% despite the condition of the financial sector.
According to a recent report by economists using analysis of 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 larger capitalization of more than 10% of existing banks.
However, analysts found that 10% of US banks currently have more unrecognized losses than the SVB, meaning the banking crisis is expected to intensify in the coming months. Even so, Bitcoin’s continued rally has proven inevitable amid this crisis.
Why could Bitcoin continue the rally?
Although the reason behind a bitcoin rally in the midst of a banking crisis may be quite evident since the relationship between the two is not necessarily causal or predictable. However, several potential factors are still worth pointing out, as most traders are still confused about whether this is a “bullish run” or another possible “bull trap”.
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Bitcoin has always been a decentralized asset that operates independently without traditional banking systems. This means that cryptocurrencies are not subject to the same regulatory or monetary policies as fiat currencies, and their value is determined by market demand rather than government intervention.
In a time of financial uncertainty like the one facing US banks, some people may see cryptocurrencies like 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 floor of the banking crisis, traditional bankers can continue to accumulate BTC, therefore increasing its price.
Vijay Ayyar, vice president of corporate and international development at cryptocurrency exchange Luno said 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 therefore it helps to have an uncorrelated asset.”
BTC against gold
Gold was once seen as an uncorrelated asset at times like this. However, with the rapid adoption and decentralization of Bitcoin, as well as the world going digital – even BTC being dubbed “digital gold” – people have started to see the king crypto as a nicer alternative to gold.
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Since the beginning of the year, gold has only added about 9% to its value compared to Bitcoin, which had gained more than 70% in value since January. Interestingly, it is worth noting that even during this ongoing banking crisis, Bitcoin it is still seen as the biggest winner among other cryptocurrencies.
Bitcoin is up nearly 30% in the past week, going from a low of around $19,000 to a nine-month high as of Monday morning at $28,509.
Ethereum (ETH) However, which is the second largest cryptocurrency by market capitalization, it has seen less gains compared to BTC. ETH is only up 13% in the last 7 days.
“As this banking crisis unfolds, it will be interesting to continue to watch Bitcoin price action as more and more people think about owning Bitcoin as a smart alternative to the current system,” Ayyar concluded.
Unsplash Featured Image, TradingView Chart
