Banking Crisis Pushes UpBitcoin Prices!Bitcoin's latest rally was fueled by First Republic Bank (NYSE:FRC) earnings report and federal seizure rumors!
In addition, for a long time after the advent of Bitcoin, it is generally believed that it is actually an important tool to hedge against inflation. After many back and forth, this view was tested in 2022. At that time, in order to deal with inflation, the Federal Reserve began the fastest and largest interest rate hike cycle in 40 years, which also helped the price of Bitcoin to rise all the way, all the way up To the current price of around 30,000.
Bitcoin Gains From U.S. Banking Crisis
From 2020 to 2022, the Federal Reserve's M2 money supply increased by 39%, and all crypto assets are beneficiaries - a historic surge in liquidity has inflated both stocks and cryptocurrency market capitalization, the latter in November 2021 Approaching the 3trillion market capitalization milestone. At that time, the price of Bitcoin reached an all-time high of $67,500.
However, Bitcoin has since gone downhill as the Federal Reserve began cutting money to fight inflation. During the transition from QE to QT, the dollar strengthened, and Bitcoin prices weakened with it. And when the Federal Reserve further punctured the cryptocurrency bubble, the situation continued to deteriorate, including Terra and Celsius, to 3AC and FTX.
Now, as the holiday cycle draws to a close and the Federal Reserve begins to shake up more vulnerable commercial banks, Bitcoin is picking up steam again.
It’s important to note that of the three banks, the collapse of Silvergate was the only one that put negative pressure on the price of Bitcoin.
Judging from this incident, Bitcoin is not as a hedge against inflation as initially speculated. More precisely, and now more clearly, Bitcoin is primarily a hedge against currency debasement.
More broadly, it is a hedge against the greater instability central banks create through fractional reserve requirements. Under a fractional reserve system, banks hold only a fraction of customer deposits—a stark contrast to the whole concept of Bitcoin, which provides a finite supply of money with a decentralized self-stock that cannot be increased at will.
On the bright side, recession is the nemesis of inflation, and the Federal Reserve will enter a cycle of interest rate cuts at this time to stimulate the economy. And in this case, Bitcoin can only benefit. It is bullish on this possibility that Geoff Kendrick, head of digital at Standard Chartered Bank, said on Monday that by the end of 2024, the price of Bitcoin may reach an all-time high of $100,000.
