Bitcoin hit highs above $29,000 Wednesday morning, amid fears of a new U.S. banking crisis as shares in First Republic Bank tumbled 50%.
The price of Bitcoin hit a high of $29,173, per CoinGecko data, and is currently trading at just under $28,950, up 5.7% on the day. However, Bitcoin has yet to recover fully from its recent slump, and remains down 4.7% on the week.
Shares in the San Francisco-based First Republic Bank nosedived Wednesday morning following a dismal quarterly report in which it reported higher-than-expected withdrawals of over $100 billion in March, raising concerns about the solvency of the regional lender.
The U.S. banking sector has faced challenges in recent months; in March, regulators shut down Signature Bank, while Silicon Valley Bank collapsed due to insolvency. The uncertainty has revived the narrative around Bitcoin’s value proposition as a “safe haven” asset.
Earlier this month, BitMEX CEO Arthur Hayes told Decrypt that crypto serves as a hedge against risk from the traditional banking system, warning that, “Everyone is going to take an 'L' unless they get some crypto or some gold—some hard asset that’s outside of the traditional banking system.”
Bitcoin decouples from stocks
Gold also posted positive gains with a 0.75% rise on Wednesday, while the dollar index against other major global currencies, DXY, dropped by 0.31% due to wavering confidence in the U.S. banking system.
Bitcoin’s positive move came on the heels of a decline in the top stock market indices, the S&P 500 and Nasdaq 100. The two indices dropped severely on Tuesday, posting a 1.58% and 1.01% loss, respectively. The futures market for the indices shows further losses for the S&P 500 index, with slight gains for the tech-heavy index on April 26.
The correlation coefficient indicator shows that Bitcoin’s correlation with the stock market has dropped since the start of April, while its correlation with gold has gotten stronger.
Bitcoin’s price rise is also attributable to the prospect of fresh liquidity injections into the market from the Federal Reserve or other institutions, in the wake of uncertainty around First Republic Bank.
Benjamin, co-founder of crypto analytics firm Jarvis Labs, told Decrypt that, there is, “certainly buying interest on BTC whenever banking issues pop up. But that does not have to be a translation of liquidity actually coming into the market in this instance, but more due to anticipation that it will.”