Bitcoin gains $26 billion as banking crisis gathers pace

Bitcoin jumped on Monday as some investors turned to digital currencies amid a crisis in the traditional banking sector.

Bitcoin was up 5% at $28,378.35 around 5:20 a.m. ET, according to CoinDesk. Earlier in the day, bitcoin hit $28,554.07, its highest level in nine months.

In the 24 hours to 5 a.m. ET Monday, the value of all bitcoin in circulation increased about $26 billion.

The rally in bitcoin comes amid turmoil in the global banking sector triggered by the collapse of Silicon Valley Bank in the US.

In Europe, troubled Swiss bank Credit Suisse was in the spotlight after the SVB failure and after its biggest backer, Saudi National Bank, said it could not provide further financial assistance to the lender due to regulatory restrictions.

On Sunday, UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.2 billion) in a deal brokered in part by Swiss regulators seeking to stem contagion in the global banking sector.

Proponents of bitcoin have often called it “digital gold” and refer to it as a store of value, especially in moments of global turmoil, and one that is uncorrelated with other asset classes. However, Bitcoin has more often than not traded in line with stocks, and especially the technology-heavy Nasdaq.

But there are signs that bitcoin’s price movement is starting to decouple from stocks, for now.

“If you look 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 is showing signs of weakness, and so it helps to own an uncorrelated asset,” Vijay Ayyar, vice president of corporate development and international on the crypto exchange Luno, CNBC told.

“Over the years, this argument that Bitcoin is an uncorrelated asset class has been debated quite a bit, but we are now potentially seeing that point of view being vindicated in many ways.”

While gold is up around 9% this year, bitcoin is up more than 70%.

Interestingly, other cryptocurrencies on Monday did not see the same jump as bitcoin. Ether traded roughly flat. Other cryptocurrencies are not viewed as “digital gold” by followers in the same way that bitcoin is.

“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 said.