Bitcoin passes the bank stress test – As recession looms over the global market, the conventional stocks and bonds market is also facing heat. In this situation of doom and gloom, bitcoin is looking like a safe bet. Despite being a volatile cryptocurrency, it seems resilient in the face of the ongoing banking crisis and recession.
Many cryptocurrencies are doing well in this climate of crisis. However, bitcoin’s momentum is particularly striking and leading to increased demand. Bitcoin rose about 21% over the month, in comparison with gold’s 8% growth and S&P 500’s 14% decline. Bitcoin prices are currently slated beyond the $ 28,000 mark. This price mark has not been traversed by it.
Reaction to bitcoin’s recent surge in value
Edul Patel, CEO of Mudrex attributed the surge in bitcoin value to the ongoing banking crisis, rising inflation, and rekindled faith in the Federal Reserve. He further detailed that the global cryptocurrency market is slated at $ 1.18 trillion and that central banks have taken steps to boost liquidity in the market. This could have also contributed to the upward momentum in bitcoin value.
The CEO at FRNT Financial, Stephane Ouellette made a case for investing in bitcoin in these troubled financial times. He explained how a financial climate where depositors made repeated bank runs owing to the central bank’s deflationary policy of hiking interest rates, best illustrates the need to invest in bitcoin.
Cryptocurrencies are not directly impacted by any individual nation’s interest rates and certainly not more than any other variable acting in the economy, dictating its value.
Cryptocurrency’s appeal is not just that these are safe assets. The increasing inflation has resulted in short sellers increasingly buying back their coins and liquidating their large crypto positions, to the tune of $300 million.
Experts urge caution
However, many experts are warning against undue enthusiasm about the bullish phase that bitcoin is currently going through. They warn that this is just temporary momentum and that it will not last in the long run. It is yet to be seen if this increase in value will persist even after the upcoming Federal Reserve policy meeting.
As of now, it is undeniable that Bitcoin is experiencing a boom in value. As per CoinMarketCap metrics, Bitcoin now presides over 43% of the crypto market.
All digital currencies are not experiencing a similar fate. The banking crisis has negatively impacted stablecoin USD or USDC, which is pegged to the US dollar. It lost its 1:1 peg with the US dollar, post the revelation that it held reserves at the Silicon Valley Bank. Its market capitalization also declined, moving from $43.8 billion to $36.8 billion in a matter of a week.
Skeptics are cautious about treating the recent bitcoin boom as an indication of a future global cryptocurrency takeover. Ed Hindi, Chief Investment Officer at Tyr Capital, Geneva, warned that we must not be quick to proclaim that bitcoin is a replacement asset in a financial crisis. He also asserted that the current phase of bitcoin will be looked back at as a period where it was stress tested and Bitcoin passes the bank stress test.
People must tread cautiously on the crypto waters. Banking sector policies can still affect cryptocurrencies. Central banks and market regulators may hinder the ability of banks to undertake crypto transactions. Such was the case with Signature Bank, New York.Â
More details are to emerge soon
Experts are expecting more details and clarifications to emerge after the Federal Reserve’s policy meeting on Wednesday.
