On the way up
Bitcoin continues to climb higher, reaching its highest level this year with a current trading price of $28,375 as of March 20th, according to data from CoinGecko [1]. Bitcoin has surged about 70% since the beginning of the year, making it one of the best performers in the market. The latest rally comes after the cryptocurrency broke through the $28,000 mark on Sunday and hit a high of $28,503 on Monday morning.
The impressive performance of Bitcoin contrasts sharply with the plunging major bank stocks following the collapse of Silicon Valley Bank and Signature Bank earlier this month [2]. Furthermore, the global banking sector experienced additional pressure after Swiss banking giant UBS agreed to buy its crisis-hit rival Credit Suisse in an emergency deal worth over $3 billion on Sunday. Amid the banking chaos, Bitcoin has soared, leading enthusiasts to once again promote it as a “safe haven” asset [2].
Markus Thielen, the head of research at Matrixport, reassessed the price targets for Bitcoin after the previous target of $28,000 had been reached. The new Bitcoin price target is $36,000 by summer 2023, and the $45,000 target by the end of the year seems “quite plausible now,” according to Thielen. He added that both Bitcoin and Ethereum are trading above the 50-day moving average, which is bullish, but Ethereum is underperforming Bitcoin with the ETH-to-BTC ratio going down [2].
The recent closures of several major banks have raised questions about their potential impact on Bitcoin and its price point. Some experts believe that these closures could present long-term problems for the world’s largest cryptocurrency, which currently has a market value of $422 billion [1]. However, others argue that Bitcoin’s resilience and status as a “safe haven” asset could help mitigate any negative effects [1].
This debacle would not have been possible in the decentralized, transparent, auditable, and over-collateralized crypto asset ecosystem. Indeed, during the last week, crypt assets behaved like safe havens: along with gold, their prices appreciated.
— Cathie Wood (@CathieDWood) March 16, 2023
In the short term, Bitcoin has actually seen a surge in price, with some experts predicting further bullish price action [1]. However, in the long run, the closures of banks that had previously served as important intermediaries for cryptocurrency exchanges could pose challenges for the crypto industry [1].
It is important to note that the overall cryptocurrency market is still relatively small compared to the traditional stock market, with a total market cap of around $2.9 trillion at its peak in November 2021 [2]. However, the increasing adoption of Bitcoin and other cryptocurrencies by banks and wealth management firms suggests that they are becoming more mainstream and could play a larger role in the financial industry in the future [3].
The impact of constant bank closures on Bitcoin and its price point is a complex issue that could have both short-term and long-term effects. While some experts are optimistic about Bitcoin’s potential as a safe haven asset, others believe that the closures of important banking intermediaries could pose challenges for the crypto industry in the long run. Ultimately, the future of Bitcoin and cryptocurrencies will likely depend on a range of factors, including regulatory developments and broader trends in the financial industry.
As the world’s largest central banks, including the Federal Reserve, the Bank of England, and the European Central Bank, announced “coordinated action” to enhance liquidity in their standing U.S. dollar swap arrangements, Credit Suisse’s stock plunged nearly 60% in morning trade Monday, and UBS was down 7% [2]. According to Thielen, “Crypto is driven by beta factors, and there is a macro liquidity story developing that has been historically very powerful for Bitcoin.” He also mentioned that the macro backdrop for Bitcoin has never been more perfect [2].
Bitcoin’s current surge could be due to the recent banking turmoil and the increased demand for safe-haven assets, as experts reassess their price targets for Bitcoin and other cryptocurrencies, like Ethereum, which also saw a surge in the past week [3].
