Bitcoin has once again surged past $29,000, and it appears that the ongoing banking crisis in the US is one of the reasons for the cryptocurrency's rally. Just hours after US Federal Reserve Chairman Jerome Powell assured the public that the US banking system is safe and sound at yesterday’s FOMC meeting, several regional banks have come under heavy pressure, causing their stocks to plummet.
Los Angeles-based PacWest, a regional bank that is rumored to be looking for a buyer, has experienced a significant drop in its stock prices, with a possible sale looking 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 losses in their stock prices this year.
The Federal Reserve Board of Governors has deemed another rate hike appropriate to continue fighting inflation, which marks the tenth consecutive hike. However, many experts and economists believe that the interest rates, which have risen too quickly and too sharply, are at the heart of the problem for many regional banks, as the bonds and loans on their 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. While the reasons behind the cryptocurrency's rally are speculative, the ongoing banking crisis and eroding confidence in the system are likely factors. Bitcoin was created precisely for this case, and it appears to be living up to its purpose.
Moreover, gold has also briefly reached a new all-time high, and the correlation between Bitcoin and gold is at a 2-year high. Additionally, 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 price in the long term.
Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.