Bitcoin surges above $29,000 as US banking crisis deepens

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kyiv, Ukraine – September 22, 2017: Studio shot of golden Bitcoin coins and dollar bills. Bitcoin was invented by Satoshi Nakamoto in 2008 as a form of digital money “nThis is a close-up photo of several gold-plated bitcoins together symbolizing the coin market, modern technology, finance, internet, the commerce, etc. “nBitcoin introduced in 2009 cross-border payment system in the form of virtual currency, to be used in cryptographic techniques (cryptocurrency).

Bitcoin price rallied back above $29,000 and the reason why is like poetry. Just hours after US Federal Reserve (Fed) Chairman Jerome Powell assured the public at yesterday’s FOMC meeting that the US banking system was safe and sound, many regional banks suffered again. strong pressures.

Regional banks still under strong pressure

Los Angeles-based PacWest (PACW) plunged about 60% in after-hours trading. The regional bank is rumored to be looking for a buyer and considering other strategic options, Bloomberg reported.

When this was announced the stock fell because it is clear to investors that either PACW will be sold at a massive discount or the big banks will let the regional bank crash and then buy it from the FDIC for a bite of bread. According to Bloomberg, a sale is difficult because there are not many interested buyers.

Other US regional banks were also caught in the downdraft yesterday after the FOMC meeting. Phoenix-based Western Alliance lost around -30% in after-hours trading. Since the start of the year, Western Alliances shares have fallen -90%.

Metropolitan Bank (MCB) plunged -20%, down -63% since the start of the year. Other regional banks experiencing big trouble include Valley National (-15%), HomeStreet (-11%) and Salt Lake City-based Zions (-10%). The total loss in market capitalization in the US banking sector this year topped $2.5 trillion yesterday.

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“The banking system is safe and sound” Jerome Powell yesterday The fiat Ponzi scheme is collapsing, and they won’t admit it until the end. #Bitcoin https://t.co/yaASpcRNvr

Jake Simmons (@realJakeSimmons) May 4, 2023

Earlier this week, First Republic Bank (FRC) filed for bankruptcy and was soon after sold to Americas largest bank, JP Morgan Chase. That should have solved the acute crisis, as JP Morgan CEO Jamie Dimon pointed out on Monday. Powell also pointed out yesterday that FRC was the end line.

As a result, the Federal Reserve Board of Governors deemed another rate hike appropriate to continue fighting inflation. It was the tenth hike in a row. The fed funds rate is now between 5.0 and 5.25 basis points.

For a number of pundits and economists, it is clear that interest rates, which have risen too quickly and too steeply, are at the heart of the problem for many regional banks, as bonds and loans on Bank books are worth significantly less than their official book value.

Thus, fractional banking is also at the heart of the problem. Depositors currently don’t know if their money is still safe at regional banks, especially since the FDIC has yet to declare deposit insurance for all US banks. But the question seems to be how long before the cash printer comes back on to save the banks.

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US TREASURY OFFERS DE FACTO DEPOSIT INSURANCE ON ALL ACCOUNTS, INCLUDING THOSE OVER $250,000 TO STEM REGIONAL BANKING CRISIS: GASPARINO

FXHedge (@Fxhedgers) May 3, 2023

Why is Bitcoin in place today?

Despite an extremely hawkish FOMC press conference from Powell, in which he avoided any clear statement on an interest rate pause in June and also ruled out the possibility of rate cuts before the end of the year ( based on the current Fed scenario), Bitcoin subsequently resurrected.

As always, the reasons can only be speculated. However, the ongoing banking crisis and the erosion of confidence in the system is certainly one of the reasons. After all, Bitcoin was created precisely for this purpose. Additionally, gold also briefly hit a new all-time high yesterday. Remarkably, the correlation between Bitcoin and gold is at its highest level in 2 years, as reported by Bitcoinist.

On the other hand, expectations are probably a reason, as the Fed is likely to pivot sooner than it says. According to CME’s FEDWatch tool, more than 95% expect interest rates to pause in June. Moreover, the market expects two to three rate cuts before the end of the year. The market calls Powells bluff.

At press time, Bitcoin price stood at $29,179, up 3.5% since the end of the FOMC meeting.

Bitcoin price, 4-hour chart | Source: BTCUSD on TradingView.com

Featured image from iStock, chart from TradingView.com

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