Bitcoin soars in price – is SVB collapse a springboard for BTC?
Bitcoin surged in price following the recent collapse of Silicon Valley Bank and Signature Bank, with the banking crisis acting as a springboard event for the world’s largest cryptocurrency, as global investors seek safe haven, alternative currencies.
Indeed, Bitcoin rose as much as 20% as the second and third biggest bank failures in US history spooked investors around the world. The collapse of Silicon Valley Bank (SVB) triggered fears across Wall Street of contagion in the banking system, which, according to numerous analysts, was being crippled by ongoing rate hikes.
Bitcoin even surpassed the $26,000 mark earlier this week on the release of the US consumer price index data, which showed inflation rose 6% year-on-year. Bitcoin’s local high of $26,150 set a new record for the year and the highest since June 2022.
As I said to Yahoo Finance, MSN, Forbes, Mena FN, African Eye Report, Bitcoin Insider, Forkast News, Crypto News Australia, Tech Today and Vetta Fi, amongst other media, this certainly isn’t the first time Bitcoin has shown safe haven asset traits during periods of economic uncertainty. There was a surge in demand for Bitcoin during the pandemic in 2020 as investors sought alternative assets to safeguard their wealth.
In addition, the emergency measures announced in a statement from the US Treasury and the Federal Reserve also seemingly drove investor interest in alternative currencies.
It was announced that depositors with the collapsed bank would have access to all their money from Monday. Furthermore, banks will also be allowed to borrow, essentially, unlimited amounts from the Federal Reserve next year to prevent financial institutions from selling investments that have been losing value due to the Fed’s aggressive rate hike agenda.
In essence, the SVB rescue package is a new form of quantitative easing (QE). This increases the dollar supply in circulation, which can lead to a fall in the value of the greenback compared to other currencies, as the increased supply can diminish its purchasing power.
Consequently, this drives investors to seek alternatives such as Bitcoin, which has a limited supply.
Although USD has reigned for over 75 years, there are signs the world may be steadily moving away from a dollar-dominated system.
This is due to sky-high debt levels and the massive amount of money printing underway to monetise them, leading to a substantial drop in the dollar’s long-term value.
As a result, investors are looking for alternatives, such as cryptocurrencies. As we move forward, these will increasingly compete with traditional currencies, helping to fuel the declining dominance of currently leading international currencies.
Due to the imminent financial stability risks, we now forecast the Fed will pause its aggressive rate-hiking agenda, which is bullish for Bitcoin.
Reduced interest rates make borrowing cheaper, which can lead to a hike in spending and investment, as well as higher demand for BTC as investors seek alternatives with the potential for higher returns.
Indeed, the fallout from this latest banking crisis seems to serve as a launching point for a larger objective for the world’s largest crypto. It’s a historical springboard event.