Amid the widespread speculation surrounding the traditional banking system, investors have sought refuge in high-quality assets and bitcoin has begun to regain ground with a 36.5% growth in the last two weeks.
The US and European traditional financial markets have been filled with uncertainty following the collapse of the Californian bank, Silicon Valley Bank (SVB), which, up until the point of its downfall, held the sixteenth position in the country’s system.
The SVB failed to adapt quickly enough to the aggressive hikes in interest rates carried out by the Federal Reserve (Fed), and ended up selling some of its assets at a loss to ease the liquidity crunch. This action caused panic among its clients, who withdrew their deposits en masse, and from there a domino effect was enabled in many other banks and sectors of the economy.
“The recent acquisition of Credit Suisse (one of the European banks affected by the US crisis) by UBS has exposed the fragility of the global banking system to aggressive interest rate hikes driven by the Fed,” said analysts from Exor Latin America, a financial services firm, to “Diario El Salvador.”
In the face of this scenario, investors have sought refuge in high-quality assets, and bitcoin has once again emerged as an option in the markets. According to Coinmarketcap, one of the most reliable portals for monitoring cryptocurrency stock exchanges, as of 5:00 pm on March 22, the crypto asset had reached $27,305.98.
“Bitcoin has shown an upward trend, recovering some of the lost ground, with a 36.5% growth in its price in the last two weeks. In fact, Morgan Stanley believes that this is the favorite time for crypto assets, given the general speculation surrounding the traditional banking system,” they pointed out.
Alfredo Milian, an economist, also agreed in a recent interview with Exor and stated that digital assets “will be an excellent refuge in the face of this crisis.”
“The banking crisis in the United States boosted a 30% rise in bitcoin. Digital assets will be an excellent refuge in this crisis, however, there are still people who resist believing in them,” he mentioned.
Rising interest rates
The Fed announced yesterday that it will raise rates by a quarter point. Now, there is a fear for the health of other financial establishments that are perceived as fragile. Several regional banks in the United States are under pressure, such as First Republic.
According to Exor, the fact of continuing to raise interest rates will generate greater liquidity problems for the banking system.
“The medium- and long-term forecast is contingent on what happens with interest rates, the recovery of credibility in the banking system, and other factors that may affect the market, so crypto assets remain an alternative in the face of distrust of the traditional financial system,” added the company’s analysts.