Bitcoin has once again surged beyond $29,000, and it appears that the ongoing banking crisis in the US is one of the factors behind the cryptocurrency's rally. This happened just a few hours after US Federal Reserve Chairman Jerome Powell's assurance that the US banking system is safe and sound during yesterday’s FOMC meeting. Despite this statement, several regional banks have come under heavy pressure, causing their stocks to plummet.
For instance, Los Angeles-based PacWest, a regional bank rumored to be seeking a buyer, has experienced a significant drop in its stock prices. A possible sale appears difficult due to a lack of interested buyers. Other regional banks, including Western Alliance, Metropolitan Bank, Valley National, HomeStreet, and Salt Lake City-based Zions, have also experienced stock price losses this year.
Although the Federal Reserve Board of Governors has deemed another rate hike appropriate to continue fighting inflation, many experts and economists believe that interest rates have risen too quickly and too sharply, which lies at the heart of the problem for many regional banks. The bonds and loans on these banks' books are worth significantly less than their official book value.
Despite Powell's hawkish FOMC press conference, during which he avoided any clear statement about an interest rate pause in June and ruled out the possibility of rate cuts before the end of the year, Bitcoin has continued to rise. The ongoing banking crisis and eroding confidence in the system are likely reasons behind the cryptocurrency's rally. Bitcoin was created precisely for this case, and it appears to be living up to its purpose.
In addition, gold has briefly reached a new all-time high, with the correlation between Bitcoin and gold at a 2-year high. The market expects two to three rate cuts before the end of the year and an interest rate pause in June. The market is calling Powell's bluff, and this could be another reason for Bitcoin's rally. At press time, Bitcoin's price stood at $29,179, rising 3.5% since the FOMC meeting ended. It remains to be seen how the US banking crisis will unfold and what impact it will have on Bitcoin's long-term price.
Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.