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Bitcoin rallying amid global economic turmoil 

crypto news bitcoin coin blockchain and artificial intelligence background low poly style

crypto news bitcoin coin blockchain and artificial intelligence background low poly style

The bitcoin (BTC) and crypto rally comes amid the turmoil in the global banking sector, fueled by the collapse of Silicon Valley Bank (SVB) in the US. While regulators stepped in and guaranteed deposits, people are still concerned about the irregularities at the regional banks in the US and elsewhere.

The bank runs

Two of the most crypto-friendly banks, Silvergate Capital and Signature, collapsed in March, creating a frenzy in the crypto industry. In addition, the biggest bank for tech startups, Silicon Valley Bank (SVB), also faced the same fate. But what caused their downfall? Generally, all these banks collapsed due to the same challenge; classic bank runs. As they were trying to liquidate their assets to shore up their balance sheets, it made depositors question the solvency of these institutions. Hence, depositors started to withdraw billions of dollars. The banks had to sell their backing assets for substantial losses when cash demands increased.

Similarly, in Europe, Credit Suisse came into focus after its biggest backer, Saudi National Bank, said it couldn’t provide the bank with any further financial assistance. To stem contagion in the market, Swiss regulators brokered a deal where USB agreed to buy Credit Suisse for $3.2b.

Bet on bitcoin

After JP Morgan analytics indicated that the Federal Reserve (Fed) bank backstop could inject up to $2t into the financial system, former Coinbase chief technical officer (CTO) Balaji Srinivasan warned that there would be hyperinflation in the US. Srinivasan advised people to “buy bitcoin now and get your coins off exchanges.”

The former Coinbase CTO even made a million-dollar bet on bitcoin’s price reaching $1m in three months. It all happened on March 17, when pseudonymous Twitter user James Medlock offered to bet anyone $1m that the US would not experience hyperinflation. A few hours later, Srinivasan accepted the bet. According to the proposed terms, if bitcoin fails to reach $1m by June 17, Medlock will receive $1m in USDC. However, if bitcoin is worth less than $1m million by then, Srinivasan will win 1 BTC.

Twitter users helped Srinivasan and Medlock set up a smart contract with the betting terms. Srinivasan also said he would move another $1 million USDC for another related bet. 

He tweeted:

“I am moving $2m into USDC for the bet. I will do it with Medlock and another person, sufficient to prove the point. See my next tweet. Everyone else should buy bitcoin, as it’ll be much cheaper than locking one up for 90 days.”

Bitcoin price action

At the time of writing, bitcoin price stood at $30,000, its highest level in ten months. With its market capitalization at $550b, bitcoin’s year-to-date growth is over 70% in 2023. Bitcoin is heading toward the key $32,000 area, and a breakout above it could lead to a bullish phase in the coming months. 

Crypto enthusiasts consider bitcoin as “digital gold,” referring to a store of value. This is particularly true during global turmoil, especially when bitcoin is uncorrelated with other asset classes. However, bitcoin has largely traded in line with equities, particularly the tech-heavy NASDAQ and S&P 500. But amid fears of a global banking crisis, bitcoin outperformed Wall Street bank stocks. For the first time in a year, bitcoin has shifted away from US stocks, rising more than 65% compared to S&P 500 and the NASDAQ.

Looking at the history of bitcoin and why it was created, it was precisely for events like banking crises where the existing system shows fragility. As such, owning an uncorrelated asset like BTC can be a hedge against risks. 

As this banking crisis plays out, there could be hyperinflation. As a result, more people may see bitcoin as a better alternative to the current system. If this preview is correct, investors could profit. Even if BTC fails to reach the predicted $1m mark in 3 months, traders expect a recovery after a prolonged crypto winter. 

If you’re considering investing in bitcoin, you can buy it on crypto exchanges like Gate.io. Find out how to buy BTC on Gate.io.

Disclosure: This content is provided by a third party. crypto.news does not endorse any product mentioned on this page. Users must do their own research before taking any actions related to the company.

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