The global financial market has not been very peaceful recently, but Bitcoin, which has been strongly correlated with the US stock market for a long time, has rarely "decoupled". An analysis shows that the correlation between Bitcoin and the US stock market has hit a 20-month low, and it has emerged as an independent market. At present, most opinions believe that this is related to a series of banking crises caused by the collapse of Silicon Valley Bank. Crypto opinion leaders even said that the banking crisis will become the fuse of the bull market. Perhaps everything is not that simple...
01 Bank collapse: wealth with nowhere to go
The banking crisis caused by the serial bankruptcies of European and American banks is an annual event that triggers a global sensation, and it must have been well known to everyone. The recent collapses of Silicon Valley Bank with assets of US$209 billion and Signature Bank with assets of US$110 billion were the second and third largest bank failures in the history of the United States. Then the fire spread to Europe, the fifth largest in the world. The consortium and Credit Suisse, Switzerland's second largest bank, were hit by thunder.
Although bank failures are nothing new, with at least 500 banks failing in the United States since 2000, it is extremely rare for several large players to fail in succession within a month. The series of crises in the banking industry in recent weeks have cast a difficult shadow on the entire financial market. In the past two weeks, Google Trends data shows that people's interest in the US banking crisis has increased significantly, and queries related to search terms such as "bank crisis", "bank failure" and "bank failure" have increased sharply. Perhaps for most people (also depositors), whether it is hyperinflation, financial turmoil, or interest rate hikes, as the safest and most reliable wealth custodian, at least like the reassuring "tall" image that bankers have tried hard to maintain for hundreds of years, bank failures should never happen, and all of this is so unexpected.
"Money always flows to safe and profitable places" is an eternal law. A gentleman does not stand under a dangerous wall. No one wants his assets to suffer any loss, even if it is a loss of liquidity. Depositors around the world are more or less worried about their deposits running, which makes the banking industry, which is already under pressure due to the deterioration of the overall environment, even worse, especially for small and medium-sized banks in Europe and the United States. This is the current status of the banking industry. At present, people are beginning to allocate assets based on safety. In order to avoid putting all eggs in one basket, some funds are dispersed into some safe-haven assets, which has driven the surge in gold and Bitcoin. This is why many people say that the safe-haven property of Bitcoin has begun to emerge...
02 Is Bitcoin’s safe-haven property beginning to emerge?
On January 3, 2009, Satoshi Nakamoto left a sentence on the Bitcoin Genesis Block: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks", which is exactly the title of the front-page article of The Times (January 3, 2009, the Chancellor of the Exchequer is on the verge of implementing a second round of emergency aid for banks).
Yes, it is exactly the same as the current situation. It was the night when the banking industry was in turmoil last time. After the bankruptcy of Washington Mutual Bank in 2008, the largest bank in the United States, Bitcoin was born with the mission of "freedom to save banks". At that time, according to the Bitcoin white paper released by Satoshi Nakamoto, people saw a solution to the consequences of banks' excessive money supply and arbitrary policies and to protect the sanctity of personal assets. Some people also believed that it was the largest social experiment in human history. The safe-haven property of Bitcoin was once controversial. Many people believed that Bitcoin was a risky asset with huge fluctuations and could not hedge risks. Therefore, it was not a safe-haven asset. Therefore, we have seen that Bitcoin has been fluctuating with the US stock market for a long time, and people even began to think that the crypto market led by Bitcoin has become the "US stock crypto sector". In fact, there are two main reasons why we have not seen the safe-haven property of Bitcoin in the past: First, the volume of Bitcoin is still too small compared to gold, which makes it easy to fluctuate. Second, the safe-haven property of Bitcoin is currently conditional. It is not a "killer" for all risks, but is aimed at the risks brought about by hyperinflation with strong correlation and the abuse of the centralized position of the traditional financial system. The banking crisis in Europe and the United States has made people realize that Bitcoin is a "good medicine", so it has successfully become a safe haven for some traditional funds. Recently, Coinbase said in a report that the medium- and long-term prospects of the crypto market have been strengthened after the recent turmoil in the US banking industry. Crypto assets have shown a certain degree of resilience, partly due to technical reasons, but also because more and more people now recognize the basic value proposition of replacing the inherent failure points of the traditional financial system. The report said that the technology behind open blockchains and transparent smart contracts is in stark contrast to the poor risk management practices that caused turmoil in the US banking industry this week. This supports the argument that digital assets are alternatives and viable solutions to failure points in the existing financial system. At the same time, the US dollar stablecoins in the crypto market have also been severely de-anchored from the US dollar due to the banking crisis, which has made the on-site funds industry feel uneasy. For example, the remaining funds of the $1 billion industry recovery plan originally set by the head crypto platform will be converted from stablecoins to native crypto assets such as Bitcoin.A single stone stirs up a thousand waves, and some of the uneasy US dollar stablecoins in the market have also been replaced by Bitcoin, which is more "anti-fragile". So far, people have seen the emergence of Bitcoin's safe-haven properties, whether relative to on-site or off-site wealth.
03 Maybe it’s not that simple
Although Bitcoin is becoming more and more mainstream and larger in size, more and more KOLs are joining the ranks of those who are optimistic and believe that the banking crisis will be the turning point of the Bitcoin bear market and that the Bitcoin bull market with its safe-haven properties is about to arrive. However, reason tells us that it may not be that simple.
As an asset, Bitcoin actually has more than one attribute. As digital gold, it has a safe-haven attribute, and it also has a speculative risk asset or alternative asset attribute. In fact, these two attributes are somewhat conflicting. When risk appetite is high, Bitcoin, which is highly volatile and highly speculative, becomes a good target. Similarly, the current push for Bitcoin is a subtle risk aversion brought about by the banking crisis. However, market sentiment has always been swayed by the wind and is still easily influenced by regulatory policies, interest rates and other macro-environmental factors.
Furthermore, if there is a ratio between the two properties of Bitcoin, it is very likely that the safe-haven asset and risky asset are in the 2:8 ratio according to the Pareto Principle. Maybe one day, the ratio will be inverted to 8:2, but at least for now, for 80% of the funds allocated to Bitcoin, it may be allocated as a risky asset.
Rationally speaking, we cannot conclude that the bull market has begun based on temporary market sentiment.
04 Summary
Bank the unbanked, unbank the banked (let the unbanked have bank accounts and make the banked no longer dependent on bank accounts), this is a story about whether you should put your money in someone else's pocket or in your own pocket.