While the US banking crisis seems to be getting worse every day, the crypto market including Bitcoin (BTC) has reacted to this positively. Over the past few weeks, BTC has risen by almost 40% despite the financial sector’s plight.
According to a new report by economists using the analysis of the now bankrupt Silicon Valley Bank (SVB), more than 186 banks are vulnerable to collapse after the fall of SVB. According to the report, Silicon Valley Bank has a capitalization of more than 10% of existing banks.
However, analysts found that 10% of US banks now have undisclosed losses compared to SVB which means the banking crisis will only intensify in the coming months. Even so, Bitcoin’s continued rally has proven inevitable in the midst of this crisis.
Why Can Bitcoin Continue to Rally?
Although the reason behind a Bitcoin rally in the middle of the banking crisis may be quite obvious given the relationship between the two is not necessarily causal or predictable. However, some potential factors are still worth noting because most traders are still confused whether this is a “bull run” or another “bull trap”.
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Bitcoin has always been a decentralized asset that operates independently without the traditional banking system. This means that crypto is not subject to the same regulatory or monetary policies as fiat currencies, and its value is determined by market demand rather than government intervention.
Times of financial uncertainty such as those affecting US banks are when some people may see cryptocurrencies such as Bitcoin as a safe haven for their assets. With major banks such as SVB, Silvergate, and Bank marks being one of the first to open the floor of the banking crisis, traditional bankers can only continue to accumulate BTC, therefore, increasing the price.
Vijay Ayyar, vice president of corporate and international development at crypto exchange Luno toward CNBC “If one looks at the history of Bitcoin and why it was created in the first place, it is precisely for events like this where the current system shows signs of weakness and therefore having uncorrelated assets helps.”
BTC To Gold
Gold was once viewed as an uncorrelated asset during times like these. However, with the rapid adoption and decentralization of Bitcoin and also the digital world where even BTC has been dubbed “digital gold”, people have started to see the king of crypto as a more attractive alternative to gold.
Related reading: Profit-Taking Bitcoin Transfers Spike As BTC Breaks $27,000
Since the beginning of the year, gold has only added about 9% to its value compared to Bitcoin which has gained over 70% in value since January. Interestingly, it should be noted that even in the ongoing banking crisis, Bitcoin it is still seen as the highest gainer among other cryptocurrencies.
Bitcoin has surged nearly 30% in the past week moving from a low of around $19,000 to tap a nine-month high on Monday morning at a price of $28,509.
Ethereum (ETH) which is the second largest crypto by market cap, but slightly smaller than BTC. ETH is only up 13% in the last 7 days.
“As this banking crisis plays out, it will be interesting to continue watching Bitcoin price action as more and more people think of having Bitcoin as a smart alternative to the current system,” Ayyar concluded.
Featured images from Unsplash, Charts from TradingView