Bitcoin posted impressive gains of over 6% in the past 24 hours, reaching a high of $26,350 on Friday morning, per data from CoinGecko.
Bitcoin’s price surge came alongside a wider uplift in the cryptocurrency market, which saw the total market cap of all cryptocurrencies rise over 4% in the past day, to $1.17 trillion. It follows a rise in U.S. and Asian stock markets after major lenders in J.P. Morgan, Goldman Sachs, and others agreed to inject $30 billion to save U.S.-based First Republic Bank from insolvency, promoting risk-on sentiments.
Earlier this week, U.S. inflation data for February came along the lines of market expectations, showing signs of slowing down. The CME FedWatch tool shows that traders have put an 84.1% chance that the Fed will raise rates by 25 bps, while the rest predict that Fed could also maintain the current rate.
The dollar's yield is declining as the Fed potentially moves away from quantitative tightening, prompting renewed interest in risk-on assets like stocks and crypto from investors.
Entering a regime of “QE light”
On Thursday, the European Central Bank also raised its benchmark interest rate by 50 base points (bps), putting further pressure on DXY with a relatively higher-yielding euro than the dollar.
"Bitcoin is reacting to the increase in the Fed's balance sheet and the form of "quantitative easing (QE) light" taken in response to Silicon Valley Bank," Nathan Batchelor, managing partner at Biyond Trader, told Decrypt. He added that, "Technically Bitcoin is wildly bullish above $25,000 and looks to be targeting $28,000 at a minimum."
Another factor influencing Bitcoin's price is the risk of a global banking crisis. Banks worldwide in Europe and the U.S. are facing a potential insolvency crisis. While the state governments and other larger institutions like J.P. Morgan have backstopped the fallout for now, uncertainty around a banking failure is helping to build positive sentiment around decentralized alternatives such as Bitcoin.