March 21, 2023: Bitcoin has increased past the $28,000 level after the weekend as investors rediscovered its charm as an alternative banking system.
On Monday, the cryptocurrency had drawn back a while. Bitcoin decreased over 2% to $27,705.23, according to Coin Metrics. Earlier in the day, it hit $28,554.07, its highest level in nine months. Therefore, either decrease by 3.5% to $1,765.60.
The weekend rally in bitcoin came amid continued turmoil in the global banking sector. On Sunday, UBS agreed to buy Credit Suisse for 3 billion Swiss francs in a deal partly brokered by the Swiss regulators looking to stem contagion all over the international banking sector.
“Bitcoin continues to trade like a leading risk-on asset like it has for the past two years,” said James Lavish, managing partner at the Bitcoin Opportunity Fund. “The rescue of Credit Suisse has put out a large credit fire… this emboldens bitcoin buyers who are now anticipating the Fed slowing the rate increase and signalling a coming pause this week.”
As of Monday afternoon, there is about a 72% chance of a quarter-point increase by the Fed, according to CME Group data using fed funds futures contracts as a guide. The other 28% anticipate no hike, and Chairman Jerome Powell may start to ease his aggressive tightening campaign due to the emerging financial contagion.
Bitcoin is coming off its best week since January 2021, right before the first bull run that year, while ether just posted its best weekly gain since August 2021. The two are up for the year by 67% and 46%, respectively.
Some bitcoin advocates have often dubbed it “digital gold”, which refers to it as a store of value, particularly in moments of international turmoil, and one uncorrelated with other asset classes. Therefore, bitcoin has more often than not traded in line with equities, the tech-heavy Nasdaq.
But there are signs that bitcoin’s price movement is beginning to decouple from stocks.
On Monday, Gold is up nearly 9% this year; bitcoin has surged more than 70%.
Other cryptocurrencies did not see the same jump as bitcoin. Ether was trading roughly flat. Proponents do not see other cryptocurrencies as “digital gold” in the same way that bitcoin is.
“As this banking crisis plays slash, it’ll be interesting keeping to watch Bitcoin price action as more people think of owning Bitcoin as a clever change to the current system,” Ayyar said.