Bitcoin regains $29,000 amid uncertainty at First Republic Bank

Bitcoin hit highs above $29,000 on Wednesday morning amid fears of another US banking crisis as shares of First Republic Bank fell 50%.

The the price of Bitcoin peaked at $29,173, per CoinGecko data, and is currently trading at just under $28,950, up 5.7% on the day. However, Bitcoin has yet to fully recover from its latest decline, and is still down 4.7% for the week.

Shares of San Francisco-based First Republic Bank fell Wednesday morning after a dismal quarterly report in which it reported higher-than-expected withdrawals of more than $100 billion in March, raising concerns about the regional lender’s solvency.

The US banking sector has faced challenges in recent months; in March, regulators shut down Signature Bank, while Silicon Valley Bank collapsed due to insolvency. The uncertainty has revived the narrative surrounding Bitcoin’s value proposition as a “safe haven” asset.

Earlier this month, BitMEX CEO Arthur Hayes told Decrypt that crypto serves as a hedge against risk from the traditional banking system, warning that “Everyone is going to take an ‘L’ unless they get some crypto or some gold – a hard asset that is outside the traditional banking system.”

Bitcoin is decoupled from stocks

Gold also showed positive gains with a 0.75% rise on Wednesday, while the dollar index against other major global currencies, the DXY, fell 0.31% on faltering confidence in the US banking system.

Bitcoin’s positive move came on the heels of declines in the top stock market indexes, the S&P 500 and Nasdaq 100. The two indexes fell sharply on Tuesday, posting losses of 1.58% and 1.01%, respectively. The index futures market shows further losses for the S&P 500 index, with small gains for the technology-heavy index on April 26.

The correlation coefficient indicator shows that Bitcoin’s correlation with the stock market has fallen since the beginning of April, while the correlation with gold has strengthened.

Bitcoin’s correlation coefficient with the stock market (above) and gold (below). Source: TradingView

Bitcoin’s price rise is also due to the prospect of new liquidity injections into the market from the Federal Reserve or other institutions, in the wake of uncertainty surrounding First Republic Bank.

Benjaminco-founder of the cryptanalysis firm Jarvis Labs, told Decrypt that is, “safely buy interest on BTC when banking problems emerge. But it doesn’t have to be a translation of liquidity actually entering the market in this case, but more because of the expectation that it will.”