Amid the bankruptcy of many crypto-related banks, the Bitcoin price is still up 50% this year, a gain larger than that of gold and some stock indexes.
According to CNBC, the price of Bitcoin has increased by 50% this year, despite the collapse of a series of crypto-related banks. Bitcoin's momentum is higher than many major stock and commodity indexes.
On January 1, Bitcoin was trading at $16,500. However, by March 15, this figure was hovering around the $25,000 mark after a strong rally on March 12.
This year's spike in price comes after Bitcoin's 65% drop in 2022. This plunge stems from the collapse of many major players in the crypto industry, especially FTX.
Cryptocurrency being prevailed
The recent Bitcoin price increase is an unexpected signal in the current difficult context. Two major banks in the crypto industry, Silvergate Capital and Signature Bank, have both gone bankrupt. SVB, which is considered the "backbone" of technology startups, has also failed.
According to Vijay Ayyar, Vice President at crypto exchange Luno, the collapse of Silvergate Bank, Signature Bank, and SVB sent shockwaves throughout the financial markets. Bitcoin's rally could be fueled by those failures.
“The past week's events surrounding the failure of SVB and other banks have highlighted the strength of cryptocurrencies. The decentralized financial system is starting to become a familiar concept to more people,” said Vijay Ayyar.
Bitcoin is considered a decentralized asset because it is not issued by a single entity such as a central bank. Instead, Bitcoin is formed from blockchain technology and its network is maintained by the community.
US regulators had to step in to secure customer deposits at bankrupt banks.
Antoni Trenchev, co-founder of cryptocurrency trading platform Nexo, said the intervention “reminded investors of the shortcomings in the US banking system and the dollar.” He thinks that is the reason many investors rushed to buy Bitcoin this week.
Many have claimed that investing in cryptocurrencies is a way for them to protect themselves against central bank moves. Especially when these agencies implement a loose monetary policy and cause fiat currency to depreciate in value.
Prospects from interest rates
Several banks collapsed after the US Federal Reserve (Fed) raised interest rates. In the case of SVB, they had to sell off assets, mainly treasury bonds, to strengthen the balance sheet when customers rushed to withdraw money.
However, the bank sold those assets at a heavy loss as rising interest rates pushed Treasury bond prices lower.
Some analysts say tensions in the financial sector could slow the pace of the Fed's rate hikes. This is a positive signal for risky asset classes such as stocks and Bitcoin.
“The Fed may not even raise rates in March. This will benefit Bitcoin,” commented Mr. Trenchev.
Bitcoin price has increased by 50% this year. However, the Nasdaq and S&P 500 have only gained 12% and 2.5% during the same period.
Gold, which is a favorite of investors in times of market turmoil, is up just over 3% this year.
There aren't many commodities or stocks that have higher momentum than Bitcoin. A rare name to do that is Meta, whose shares have risen about 60% this year.
Among the major cryptocurrencies, Ether is up 42% this year, while Solana is up more than 100%.
