Bitcoin Soars Amid Bank Panic | Economy and business
The big winner so far this year is bitcoin — not stocks, gold or oil. In the first three months of 2023, it has increased by 70% in value. This increase has temporarily silenced critics who considered the cryptocurrency to be on its last legs after the chaos of 2022 – a year in which some of the major players in the crypto sector collapsed, including TerraLuna, Three Arrows Capital, Celsius, Voyager and FTX. But the market mood has since turned. And after recording constant falls and suffering from the rise in interest rates in the US, the cryptocurrency seems to have turned a corner. Bitcoin climbed to $28,000 last week, well above the record low of $15,700 it hit in November. The entire crypto universe is currently worth 1.1 trillion euros ($1.2 trillion).
Some analysts believe that crypto’s rise is due to the banking panic of March, triggered by the collapse of Silicon Valley Bank and the Credit Suisse takeover of UBS, its main competitor. “Concerns about the centralized banking system increased confidence in decentralized cryptocurrencies, and risk assets were boosted by the prospect of a faster fall in inflation and interest rates,” argues Ben Laidler, a global market strategist at investment platform eToro.
One of the side effects of the banking panic was that the US Federal Reserve raised interest rates by 25 basis points, instead of the expected 50. Some investors interpreted this decision as a sign of a return to the most volatile investments that promise the greatest returns but come with the greatest risk .
The crypto community has welcomed this latest blow to financial institutions, in terms of repayment. For crypto investors, the banking panic in the US and Europe confirms their belief that in the future all financial intermediaries will be gone and there will be a decentralized system where everyone can move their money without the need for banks.
In the wake of the panic, many crypto followers took to social media to rejoice at the turn of events. “I’m old enough to remember when the CEO of Credit Suisse said that Bitcoin is a bubble. Bitcoin was $7,000 then. Bitcoin is now $28,000. Meanwhile, Credit Suisse is being acquired by a competitor and bailed out by central banks,” says Gabor Gurbacs , CEO of PointsVilleApp, posted on Twitter.
Koh Onozawa, co-CEO of cryptocurrency trading platform Bit2Me, attributes the rise in bitcoin to other factors. “Adoption is growing,” he told EL PAÍS, pointing out that major companies such as Mastercard and Visa have created their own Web3 division, while certain neobanks, such as Revolut, are making cryptocurrency available to their customers. “With the fall of bad apples, it’s more important than ever to use regulated devices,” he said.
But there is one obstacle that threatens to halt the rise of cryptocurrencies: the legal problems of Binance, the world’s largest crypto exchange. Binance and its founder Changpeng Zhao are being sued by the Commodity Futures Trading Commission for a number of alleged violations of the Commodity Exchange Act and CFTC regulations. For example, Binance did not require customers to provide identity verification information. It also communicated with US customers using a messaging platform that automatically deleted written communications, according to the AP news agency.
The market is now at a turning point. Some investors may choose to accumulate their gains, given the uncertain economic context and growing fears of a US recession. They can take a break and wait to see if cryptocurrencies continue in an upward trend. However, other investors may hang on instead of selling at a loss. Bitcoin is still worth half of what it was in November 2021, when it peaked at $69,000. For those who bought bitcoin at that moment, selling now would mean remaining in the red.
In addition to recovering financially, cryptocurrencies also hope to restore lost trust. The inflationary crisis showed that investing in bitcoin – contrary to the claims of its supporters – was not a way to hedge against rising prices. Now the crypto community has come back with another argument: that the digital currency is a safe investment given the current problems facing the banking system.
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