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Bitcoin At Highest Level In 9 Months, Crosses $28,000 Amid Banking Crisis; Why Are Cryptos Rising?

Even as the US banking sector is going through a tough phase and depositors are flocking to take back their money from certain banks, Bitcoin is the gainer whose value has significantly jumped to the highest level in 9 months to $28,200 on Wednesday, March 22. The previous high in Bitcoin was recorded on June 9, 2022, at $29,000.

Before March 10, Bitcoin was range-bound between $24,600 and $21,750 with a downward trend from mid-February to March 9 this year. However, from March 10, when Silicon Valley Bank collapsed, Bitcoin started surging and rose from $19,674 on March 10 to nearly $28,200 now, March 22. In the morning hours on March 10, Bitcoin was nearly at $19,600. It shot up to above $20,000 by 12 pm and was trading at about $22,400 on March 13.

Minal Thukral, executive vice-president (growth and strategy) of CoinDCX, said, “This sudden increase in the price has been attributed to various factors, including the long-term trend of accumulation during dips below $20,000 and the liquidity crisis faced by the banking sector.”

Three banks in the US, Silicon Valley Bank, Silvergate Bank and Signature Bank, have collapsed in the past 12 days. While, Swiss lender Credit Suisse and US-based First Republic Bank are also struggling and securing support to survive. After SVB collapsed on March 10, which was the first bank to fail, Bitcoin prices started surging. It is being termed as the biggest fall since the global financial recession of 2008-09.

Thukral said Bitcoin, the world’s largest cryptocurrency by market capitalisation, has experienced a significant surge in its value, rising by more than 28 per cent over the last week and trading at $28,000. The Bitcoin dominance has also reached an all-time high of 44.4 per cent after six to eight months.

Crypto services provider Matrixport in its report said, “Bitcoin is benefitting from instability in the financial system, falling inflation that allows the (US) Federal Reserve to become less hawkish and a regulatory overhang that has hit stablecoins.”

A stablecoin is a cryptocurrency whose value is linked to that of another currency, commodity, or financial instrument. Some of the examples are like Tether, USD Coin, Binance USD and True USD, which are linked to the dollar value. “Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions,” according to investopedia.com.

CoinDCX’s Thukral said that in response to the banking liquidity crisis, central banks have planned to inject cash to ensure market liquidity, following an emergency takeover of Credit Suisse by UBS and a series of bank failures in the US. The instability in the banking industry has been the primary factor influencing the movements in the capital markets.

“In the wake of this, more investors are currently considering Bitcoin as a safe haven asset. This could result in Bitcoin’s value continuing to rise to levels beyond $30,000 in the near future. Additionally, crypto projects with good developments like ETH, MATIC, LIDO Finance, and UNISWAP are expected to see significant traction in the coming days,” he added.

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