Bitcoin jumps as First Republic pulls banking sector concerns back into focus
A visual representation of the cryptocurrency Bitcoin on November 20, 2018 in London, England.
Jordan Mansfield | Getty Images News | Getty Images
Cryptocurrencies rallied on Wednesday as investor concerns about the US banking sector began to resurface, with First Republic Bank struggling to avoid another collapse.
Bitcoin jumped 5% to $28,974.00, according to Coin Metrics. That helped lift ether, which rose 4% to $1,913.05. Both cryptoassets remain below the key levels of $30,000 and $2,000, respectively, which they traded two weeks ago for the first time since last year.
Bitcoin had been trading sideways for several days, with volatility returning to early March lows, before the banking crisis began and became one of the cryptocurrency’s biggest upside catalysts this year. Now, problems at First Republic and rumors of potential failure could help drive the cryptocurrency’s price action again, according to Matt Hougan, chief investment officer at Bitwise Asset Management.
“Crypto rallies during banking crises, and it looks like the banking crisis may not be over,” Hougan said.
First Republic shares fell nearly 50% to a record low on Tuesday after reporting a massive drop in deposits in the first quarter as customers pulled out their money following the collapse of Silicon Valley Bank. CNBC’s David Faber reported that the next few days are crucial for the company, as other banks and federal officials try to put together a rescue plan for it.
Bitcoin surged 22% in March as the crisis among US regional banks opened investors’ eyes to the diversity of bitcoin’s narrative and, in particular, its potential use as a hedge against uncertainty and as an alternative banking system.
“Bitcoin continues to straddle the line between being the ultimate lifeboat from the current banking system and the leading asset risk,” said managing partner James Lavish at the Bitcoin Opportunity Fund. “As the First Republic now teeters on the brink of collapse, bitcoin represents both a safe haven versus unsafe bank deposits.”
However, the pullback over the past week has not negated the uptrend so far this year, and crypto remains in a long-term bull market, according to Bitwise’s Hougan.
The US dollar index was down 0.56% and is on pace for its worst day since April 12, when bitcoin traded at its highest this year. The two tend to have an inverse relationship.
Meanwhile, bitcoin’s 30-day rolling correlation with gold has risen since March and now stands at 57%, the highest level in nearly two years, according to crypto data provider Kaiko.
— CNBC’s Gina Francolla contributed reporting
