Bitcoin May Continue Rally Amid Intensified Banking Crisis, Here’s Why
While the US banking crisis seems to be worsening every day, the crypto market including Bitcoin (BTC) has responded to this in a positive way. Over the past few weeks, BTC has increased by almost 40% despite the state of the financial sector.
According to a recent report by economists using the now-bankrupt Silicon Valley Bank (SVB) analysis, more than 186 banks are at risk of collapse after SVB’s fall. According to 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 undisclosed losses than SVB, meaning the banking crisis is only expected to intensify in the coming months. Nevertheless, Bitcoin’s continuous rally has proved inevitable in the midst of this crisis.
Why Bitcoin Could Continue Rally?
Although the reason behind a Bitcoin rally in the midst of a banking crisis can be quite clear given that the relationship between the two is not necessarily causal or predictable. However, several potential factors are still worth noting as most traders remain confused as to whether this is a “bull run” or another potential “bull trap”.
Related Read: Bitcoin Price Approaches $28,000 As BTC Surge To Its Highest Level Since June
Bitcoin has always been a decentralized asset that operates independently without traditional banking systems. This means that the crypto is not subject to the same regulatory or monetary policy as fiat currencies, and its value is determined by market demand rather than government intervention.
A time of financial uncertainty like the one going on with US banks is when some people may see cryptocurrencies like Bitcoin as a safe haven for their assets. With large banks such as SVB, Silvergate and Signature bank as one of the first to open the banking crisis floor, traditional bankers can only continue to accumulate BTC, therefore increasing the price.
Vijay Ayyar, Vice President of Corporate Development and International at crypto exchange Luno told CNBC “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 thus it helps to own an uncorrelated asset.”
BTC to Gold
Gold was once seen as an uncorrelated asset in times like this. But with Bitcoin’s rapid adoption and decentralization, as well as the world becoming digital that even BTC is being called a “digital gold”, people have started to see the crypto king as a more pleasant alternative to gold.
Related reading: Bitcoin profit-taking transfers surge as BTC breaks $27,000
Since the beginning of the year, gold has only added about 9% to its value in contrast 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 risen nearly 30% in the past week, moving from a low of around $19,000 to hit a nine-month high as of Monday morning at a price of $28,509.
Ethereum (ETH) however, which is the second largest crypto by market capitalization has seen fewer gains compared to BTC. ETH has only risen 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,” concluded Ayyar.
Featured image from Unsplash, chart from TradingView
