Bitcoin (BTC), the largest cryptocurrency in the world, continues to move higher as the banking crisis seems to be hitting more than just U.S. banks. Credit Suisse has requested support from the government in order to stabilize the current situation in the market. Meanwhile, Bitcoin surged to over $26,100 in the last few hours.
Bitcoin Surges Above $26,000 Amid Banking Uncertainty
Both the US and Swiss governments have already announced different interventions in order to keep the banking industry secure, especially for Credit Suisse and Silicon Valley Bank (SVB). Despite these announcements, the interest rate hikes that the U.S. Federal Reserve (Fed) has pushed in recent months have affected regional banks.
Therefore, the banking industry is now requesting central banks to stop hiking rates, as this could create further problems in the banking industry. Nonetheless, the European Central Bank (ECB) has already increased rates once again from 2.5 per cent to 3 per cent. This is in line with what the bank informed last month and despite the pressure from the banking industry to stop the current hiking cycle.
Central banks are now at a crossroads between inflation rates and a banking crisis. While interest rates have to continue to move higher in order to stop inflation rates to continue to grow, it will be harder for banks to remain stable if that’s the case. Some central banks are ahead of others in terms of interest rates hiking. The Fed, for example, has done better work compared to the European Central Bank, which is running behind in inflation rates, which have surpassed 20% in some member states such as Estonia.
Nevertheless, the entity directed by Christine Lagarde is now worried about how much further they will be able to pursue their interest rate goals to curve inflation. Another thing that is worth taking into consideration is that banks that seem to have a higher risk of experiencing liquidity issues could soon start to reduce the credit that they offer to clients. This could also affect the real economy as credit has been quite high in recent years, especially after COVID-19.
Bitcoin Price Continues to Surprise
Despite the bear market that Bitcoin and other virtual currencies experienced in 2022, 2023 seems to have changed the way in which Bitcoin is behaving. Apparently, investors are looking at Bitcoin as a possible alternative investment to the banking industry, which, in the worst-case scenario, could create a similar crisis to what we have seen in 2008.
The question is now related to how far could Bitcoin move and whether investors are ready to support Bitcoin’s proposal as an alternative financial system. According to CoinGecko, Bitcoin surged above $26,100 and it reached a market capitalization of $508 billion. In the last 24 hours, the largest cryptocurrency in the market surged by 5.8%. The largest price increase among the top 10 digital assets after Dogecoin (DOGE), which registered a 6% price increase during the same period of time.
When we analyse the price performance of Bitcoin during the last 7 days, we see that BTC registered 30% gains. That’s one of the largest price increases for BTC in the last months, something that has allowed investors to pay close attention to BTC once again. Another thing to take into account is that, despite its market capitalization, Bitcoin’s led the market in terms of percentage gains. Altcoins performed well, but not as well as Bitcoin during the most recent bull market.
Bitcoin has also been marketed as one of the best tools to avoid inflation alongside gold. As we already know, Bitcoin has a market capitalization that is capped at 21 million. Every four years, the rate at which new Bitcoins are created gets reduced by 50%. Today, 900 BTC are created on a daily basis. Next year, Bitcoin is going to experience a new halving event, which would reduce the new issuance of Bitcoin from 6.25 BTC per block to 3.125 BTC per block.
This is in contrast to what has happened to fiat currencies in many countries around the world in recent years. The surprising thing is that even developed economies have experienced high inflation rates, showing that money printing creates inflationary pressure on the price of goods and services.
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