Why is Bitcoin going up? – Forbes Advisor UK
The price of Bitcoin (BTC) has been on a wild ride over the past month, thanks to the rapidly unfolding banking crisis and government efforts to contain the fallout in both Europe and the US.
Three banks have failed so far in the US, prompting the Federal Reserve to launch an emergency lending program to stem the panic. A similar picture is evident in Europe, with Swiss authorities forced to intervene to save Swiss bank Credit Suisse from bankruptcy.
Silvergate Bank, which was deeply involved in the world of cryptocurrency, shut down its crypto payment platform in early March and announced the liquidation a few days later. This was soon followed by startup lender Silicon Valley Bank (SVB) announcing its inability to meet obligations and the liquidation of Signature Bank.
This triggered a drop of over 10% in the price of Bitcoin in just one week. However, the price has since risen by over 15% with confidence restored following the US government’s commitment to cover the debt of SVB and Signature Bank.
Ethereum (ETH), the world’s second-largest cryptocurrency by market capitalization, has followed a similar trajectory over the past month, and is currently trading at its highest level since November 2022.
Why Is Bitcoin Rising Today?
Bitcoin’s price fell earlier this week on the news that the US Commodity Futures Trading Commission (CFTC) had filed a lawsuit against Binance for knowingly offering unregistered crypto derivatives,
However, Bitcoin has since shaken off this news to recover strongly, posting a gain of more than 5% at one point today alone.
With question marks remaining over the stability of the banking sector, Bitcoin has benefited from net inflows into cryptocurrency from investors looking for a decentralized currency.
Investors have also been encouraged by the possible reversal of the Fed’s interest rate hikes, which puts downward pressure on risky assets such as cryptocurrency.
The USDC coin regains its peg
In other key crypto news, Circle’s USDC coin regained its dollar peg after losing the key benchmark following Silicon Valley Bank’s announcement.
The fear among investors was that Circle kept a portion of the funds invested in the FDIC-backed bank. Afraid that the stablecoin issuer may not have the reserves to finance its obligations anymore, there was a small run on the coin.
As USDC fell to around $0.86 per coin, crypto exchange Coinbase even halted trading of the coin to try to stem the losses while maintaining an important peg of $1.00.
Following the announcement by the US government that the FDIC would support all of Silicon Valley Bank’s obligations, the USDC regained the bond.
What Does Bitcoin’s Bounce Mean for Investors?
The big question facing investors is whether this is yet another sign that Bitcoin has bottomed or whether the refuge is just a dead cat bounce – where prices temporarily rally in the middle of a long-term negative trend, only to resume the downward slide after that.
While the rebound has provided a welcome respite, the reality is that we are in unprecedented territory in terms of the geopolitical climate, rampant inflation and the Fed’s stance on interest rates.
Anyone familiar with the industry knows that even at the best of times, it is nearly impossible to predict the short-term price action of digital assets. This is especially true in this market environment.
