Why Bitcoin, Ethereum, and Bitcoin Cash Are Rising This Week

What happened

Cryptocurrencies are having a banner week, despite chaos in the wider market, particularly in the banking sector, which is likely due to the fact that many people see cryptocurrencies as an alternative to the traditional banking system.

Over the past week, the price of the world’s largest cryptocurrency, Bitcoin (BTC 0.20%)traded about 25% higher as of 1:35 p.m. ET Thursday, according to data from S&P Global Market Intelligence.

Meanwhile, the price of the world’s second largest cryptocurrency, Ethereum (ETH -0.24%)traded about 17% higher, and the price of Bitcoin Cash (BCH -0.96%) was up over 14%.

So what

Bitcoin was really invented in the wake of the Great Recession. People did not trust the mainstream financial system or the government for that matter, which led to the creation of decentralized blockchain technology and the cryptocurrencies traded on these networks.

Image source: Getty Images.

Three banks — Silvergate capital, SVB Finance‘s Silicon Valley Bank, and Signature bank — collapsed in the last week. Also Swiss bank Credit Suisse came under intense selling pressure this week and had to borrow 50 billion Swiss francs from the Swiss central bank to secure liquidity.

I think this week reminded people why Bitcoin started in the first place. However, Silvergate and Signature ran real-time payment platforms that were mainly used by crypto exchanges and other crypto clients. Meanwhile, SVB had bankrolled many crypto startups.

I am surprised that cryptocurrencies have done so well given everything that has happened. First, the collapse of Silvergate and the shutdown of Signature close two of the main fiat off-and-on rails that crypto firms used to exchange dollars for cryptocurrencies and vice versa, raising liquidity concerns. In addition, media reports suggest that any potential buyer of Signature would have to agree to divest from the bank’s crypto business.

This also suggests that banking regulators are looking to drive crypto away from the traditional banking system. Former senator Barney Frank, who authored critical post-Great Recession banking regulation known as Dodd-Frank and also sat on Signature’s board, has now repeatedly said he believes the shutdown of Signature was related to “a very strong anti-crypto message.”

Bitcoin also appears to be holding its ground despite the European Central Bank raising interest rates by half a point this morning. Rising prices crushed cryptocurrencies throughout 2022, and the Federal Reserve will meet next week to discuss whether the agency should continue raising interest rates in the United States.

What now

Bitcoin and crypto price action is very, very difficult to predict, so while I’m surprised to see crypto investors shrugging off all the bad news this week, never say never in this sector. In addition, I believe that all the banking problems are helping to drive Bitcoin higher.

For now, I will keep an eye on how the Fed moves next week. An interest rate hike is not likely to be very beneficial for crypto, while no interest rate hike can be very positive. Ultimately, I continue to like Bitcoin and Ethereum and believe they will be here for a long time.