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17.03.2023 01:09 PM
Bitcoin capitalized on the banking crisis

The U.S. banking crisis is a time of opportunity for bitcoin. Its quotes rose above the 26,000 mark for the first time since June amid the collapse of U.S. credit institutions and timely and extensive support measures from the Fed and other regulators to keep the contagion from spreading. The cryptocurrency is thriving as what it was originally intended to oppose collapses. Since the beginning of the year, the BTCUSD pair has risen nearly 58%, and it looks like that's not the limit.

With the current panic in the financial markets, it's hard to find anything that doesn't support bitcoin. The 16th largest U.S. lender Silicon Valley Bank (SVB) went bankrupt, marking the second-largest bank failure in United States history. This means people will lose confidence in fiat money and start actively buying crypto assets. The second-largest stablecoin USDC collapsed because the company that manages it, Circle, held $3.3 billion in the bankrupt Silicon Valley Bank.

The transfer of capital between stablecoins, which are the link between fiat and crypto money, into BTCUSD, ether and other tokens contributed to the growth of the sector leader's quotes.

Dynamics of USDC stablecoin

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Did the Fed and other regulators throw a lifeline to the banking system by guaranteeing the return of deposits in bankrupt credit institutions, even if they were not insured? Wonderful! This means that the cryptosystem will still have sources of fiat money.

Thus, the banking crisis in the U.S. was the main catalyst for the BTCUSD rally. It lies on the surface. In fact, the panic in the market led to a sharp demand for Treasury bonds, their yields fell. This creates a tailwind for the entire risky asset class. As, however, revived expectations of a "dovish" Fed reversal.

In February, bitcoin was feeling out of whack amid accelerating U.S. inflation and talk that the central bank would raise the federal funds rate by 50 bps at its next meeting. In March, cracks in the banking system are causing investors to speculate that the monetary tightening cycle may be over altogether. Derivatives have lowered the implied borrowing cost ceiling to 4.8% and expect the cost of borrowing to fall 100 bps to 3.8% by the end of 2023.

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The intention of the large banks in the United States to provide $30 billion of liquidity to First Republic Bank, which is poised to go under, fueled the BTCUSD rally. Stock indices reacted to this news with growth, which improved global appetite for risk and pushed the quotes of the leader of the cryptocurrency sector up.

Technically, there is a bullish trend on bitcoin's daily chart. Its breakdown is possible only in case the quotes fall below 19,625, which will result in the formation of the Broadening Wedge pattern. In the meantime, we should stick to the strategy of buying on the pullbacks. Pivot points 27,200 and 29,000 are the targets for the upward movement.

Marek Petkovich,
Analytical expert of InstaForex
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