Bitcoin pulls back to start May as First Republic Bank saga comes to an end
Bitcoin is under pressure as the Federal Reserve has indicated that interest rates may go higher than expected and after a major crypto-focused lender, Silvergate Capital, collapsed.
Jonathan Raa | Nurphoto | Getty Images
Cryptocurrencies took a dip on Monday to start the week and new month as investors bet that the takeover of First Republic Bank could put an end to the financial crisis that has been the biggest driver of this year’s bitcoin rally.
Bitcoin fell about 4.2% to 28,137.76 to start the week and new month, according to Coin Metrics. Ether lost 4% to 1,828.81.
On Monday, regulators seized First Republic, making it the third US bank failure this year and the biggest since the financial crisis of 2008. JPMorgan Chase will buy most of its deposits and assets.
Last week, bitcoin prices surged in the last week of April as the bank’s troubles unfolded. Trading in the cryptocurrency has been choppy, however, as investors weigh the effects of the banking crisis on crypto with high inflation, Federal Reserve policy, a potential recession and an increasingly bearish narrative building around the US dollar.
“It’s unclear whether the banking crisis narrative can continue to be a boon for bitcoin,” said Alex Thorn, head of firm-wide research at Galaxy. “Overall, the market lacks clear positive catalysts in the near term, with supply issues overhanging bitcoin… That said, bitcoin accumulation of small addresses is faster than issuance, and we expect Ethereum stakes to increase, each providing a supporting supply narrative.”
“Outside of crypto-native factors, we expect a macro environment from the back of the year to be characterized by tightening, recession and an expanding multipolarity in the global economy, all of which could support gold and bitcoin,” he added.
Investors have been expecting a slowdown from bitcoin’s first-quarter rally, although the cryptocurrency remains on an upward trend and is up around 70% for the year, after ending down more than 60%. April marked the first time in two years that bitcoin achieved a fourth consecutive positive month.
“Bitcoin and Ether started 2023 inorganically cheap, leaving plenty of room to move higher from a low-base effect,” Thorn said. “A growing banking crisis became evident in March, and the contrast with Bitcoin’s transparent and decentralized nature provided a further boost for bitcoin, while Ethereum’s successful Shanghai upgrade provided a catalyst for ethereum.”
