According to reports, it seems that the recent collapses of U.S. banks have driven up the price of the most popular crypto of all, Bitcoin.
So what is happening to the financial market? And what are the implications for the blockchain industry? Here’s everything you need to know.
Summary
Banks Collapse, Bitcoin Rises
As expected, the price of Bitcoin continues to rise as U.S. banks continue to fail, helping to reinforce the increasingly positive view of cryptocurrencies.
Which, in fact, are gaining not inconsiderable amounts as the stock market declines due to banking concerns.
Specifically, Bitcoin, the largest digital asset by market value, rose 4.4 percent to $28,892 on Tuesday.
This means that renewed fears about the stability of the U.S. financial system have boosted the price of cryptocurrencies.
Not surprisingly, Ether, the second largest token, is also up 3.7 percent.
Notably, the gains come as regional U.S. banks fueled a sell-off in U.S. equities following the collapse and sale of First Republic Bank, which prompted the Federal Reserve to suspend further interest rate hikes to protect the economy from financial fallout.
LMAX Group market strategist Joel Kruger had this to say:
“The ongoing stress associated with weaknesses in the banking sector has helped to positively highlight the value proposition of owning decentralized currencies that can be self-custodied.”
Banking uncertainties strengthen the case for bitcoin, why?
The aforementioned turmoil in the financial sector, in particular, inevitably helps strengthen the case for a currency like bitcoin, which is beyond the reach of a central bank, proponents say.
In addition, the Federal Reserve is expected to raise interest rates by a quarter point at its meeting on Wednesday in an effort to combat still-high inflation rates. However, traders continue to expect a rate cut by the end of the year. Not surprisingly, Kruger said:
“We are seeing a wave of broad-based US dollar weakness based on expectations that the Fed will issue a less aggressive statement at its next meeting. This has caused yield spreads to be against the dollar which in turn has possibly helped support cryptocurrencies.”
In fact, any rate cuts should support risky assets, including bitcoin, which is fueling some of the recent gains in cryptocurrencies.
However, Noelle Acheson, author of the “Crypto Is Macro Now” newsletter, cautioned against expectations of short-term rate cuts, saying:
“Bringing down inflation must continue to be a priority as long as the market bears it. We are seeing a boost in risky assets, but it may not last long – a lot depends on this upcoming Friday’s jobs data.”
Focus on the Price of Bitcoin (BTC)
As expected, the price of Bitcoin (BTC) has recently climbed back above $28,000, which is a key resistance level that will provide a solid base in the event of a bearish pullback.
Logically, now that the price of BTC is back up, the excitement around the popular crypto has only increased, with many experts wondering if it will reach $35,000 in the near future.
In particular, a famous analyst, Michael van de Poppe, believes that the price of bitcoin could exceed $38,000 to $42,000 in the coming days.
However, although the price of bitcoin has maintained a good recovery since the beginning of the year, the volume has remained relatively low.
As we know, a rally with decreasing volume generally indicates a decrease in the number of buyers, which could be mainly due to their exhaustion. In other words, if sellers become more aggressive, the price of BTC may not be able to sustain the current rally.
In any case, this does not mean that this is the end of the currency’s important rally, as the price of BTC continues to give bullish signals.
In addition, altcoins could also begin to show an upward price trend once the price of BTC exceeds $30,000. Keep in mind that this could take a few months, according to Michael van de Poppe.
