Crypto disconnects from global financial markets amid banking sector gloom
Contrary to the sentiments in the global markets, the prices of various crypto-assets rose in the last two weeks. At $27,957 on Tuesday, Bitcoin was trading at its highest since June 2022. The total market capitalization of crypto assets, at $1.16 trillion, was the highest since August 2022.
“Last week, crypto disconnected from the traditional financial world as crypto prices rose despite the banking crisis. Many observers see this as a watershed in crypto’s evolution as an asset class,” said Parth Chaturvedi, Head of Crypto Ecosystem at crypto exchange CoinSwitch.
In the last two weeks, several major global banks have collapsed. These include three in the US, namely Silvergate, Silicon Valley and Signature, and Credit Suisse in Switzerland. This has spread panic about infection. Global markets, especially banking stocks, are experiencing heavy selling. Central banks and regulators have rushed to ease the panic in the markets.
While on the other hand, Bitcoin climbed to its nine-month high of $28,500 on Monday.
“On Monday, Bitcoin briefly hit the $28,500 mark following the announcement that the US Federal Reserve had partnered with five other major central banks to ensure the smooth circulation of US dollars,” said Edul Patel, CEO and co-founder of crypto firm Mudrex.
“This increase is attributed to a combination of factors, including instability in the banking sector, higher-than-expected inflation data and renewed confidence in a dovish Federal Reserve (Fed), bringing Bitcoin to its highest level in nine months,” Patel added.
Several other crypto tokens also followed Bitcoin’s lead. Ethereum, BMB, Solana, Polkadot and Avalanche were also in the green, according to CoinMarketCap.
However, the US central bank is due to announce its monetary policy on March 22. The US inflation data in February showed inflation of 6 percent. But reports say the Fed may move for another rate hike as core inflation remains high and sticky at 5.54 percent. This was marginally lower than 5.58 per cent in January.
“Now investors and traders are preparing for tomorrow as the US Federal Reserve prepares to announce its interest rate decision,” Patel said.
According to Chaturvedi, investors need to be cautious as news related to the banking sector can affect market sentiments.
“Regulators may continue to make it difficult for banks to process crypto-related transactions,” he said.
