Bitcoin Mint’s $100 billion rally as banking crisis and these lesser-known tailwinds fuel recent rally

by James · April 6, 2023

Bitcoin Mint’s 0 billion rally as banking crisis and these lesser-known tailwinds fuel recent rally

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Bitcoin has surged in recent weeks as many lost faith in the US banking system, serving as “confirmation” of cryptocurrency fanatics’ long-held beliefs, according to JPMorgan, but the bank’s analysts note that a few other factors have helped the biggest crypto token to a six-month high — and can help keep the rally going.

Bitcoin has risen a lot in recent weeks.

Keywords

Bitcoin is up 25% in the past month to around $28,000 — reflecting about $106 billion in market capitalization and outperforming the tech-heavy Nasdaq’s 3% decline in the period.

That increase came as Silicon Valley Bank, Signature Bank and Silvergate Capital went under, events that crypto supporters said “exposed the weaknesses of the traditional financial system,” the JPMorgan group led by Nikolaos Panigirtzoglou wrote in a note to clients Wednesday evening.

Bitcoin rallied as a “hedge against a catastrophic scenario” amid turmoil in the global financial system, Panigirtzoglou added, pointing to gold’s similar rally over the past month as a safe haven.

Strong sentiment isn’t the only thing behind bitcoin’s spring bounce, as JPMorgan identified a few other, more technical aspects driving the gains.

The January launch of bitcoin ordinals, which essentially allow non-fungible tokens to be minted on bitcoin’s blockchain, adds value to bitcoin as it “rises[s] the bitcoin network tool of other blockchains” that already allow such features, the bank noted.

And according to Panigirtzoglou, what’s probably more important to bitcoin’s rally than the banking crisis or bullishness on ordinals is shifting attention to the digital asset’s upcoming “halving” next spring, making marginal bitcoin mining costs twice as expensive; bitcoin gained as much as 30% in the six months following the previous 2016 and 2020 halving events.

Surprising fact

Gold is up 9% in the past month, holding north of $2,000 an ounce. The precious metal is leading a “new commodity bull supercycle” dating back to March 2020 as various macro factors fueled uncertainty among investors, Wells Fargo analysts John LaForge and Mason Mendez wrote in a recent note to clients.

Key background

Bitcoin is still about 60% below its November 2021 record of over $65,000, although it is up nearly 70% year to date. Other top tokens have risen far less over the past month, with ether and binance coin gains of 19% and 9% respectively in the time frame, much underperforming bitcoin.

Chief critic

“Logic … suggests a pullback” is coming soon for bitcoin, Oanda analyst Craig Erlam wrote in a Tuesday note to clients. He argues turbulence in the crypto industry — including news that the Commodity Futures Trading Commission is suing exchange giant Binance — could make bitcoin’s recent rally unsustainable. “It will no doubt be interesting to see how it performs in the coming weeks, especially if there is further turbulence for the industry,” he says.