Cryptocurrencies stood out this week as bank stocks tumbled and the global liquidity crunch rocked the stock market. For the week ending March 17, bitcoin finished up 34%, making it the cryptocurrency’s best week since January 2021 – which marked the start of the institution-led bull run this that year. Coin Metrics measures a week in crypto, which trades 24 hours a day, from market close to Friday. Bitcoin is now up 62% for the year. BTC.CM = YTD mountain Bitcoin (BTC) in 2023 Ether ended the week up 23%. At one point, it was trading at around $1,780, a level not seen since its rally before the Ethereum merger in September. Ether is up 45% year-to-date. “Crypto impressed as an unexpected banking crisis triggered a realization that Fed policy is very restrictive and the economy is heading into a recession,” said Ed Moya, senior market analyst at Oanda. “The Fed must now decide if it has enough information about the escalating risks that are spreading through several banks. Inflation is falling, but some officials may want to make another rate hike before taking a break, which could trigger a moment of de-risking on Wall Street.” Bitcoin vs. Banks The price of bitcoin doubled above the key $25,200 level to reach over $26,000, according to Coin Metrics. It hasn’t seen this level since June, days before its pre-FTX low of around $18,000. BTC.CM = 1Y mountain Bitcoin, Bitcoin’s 1-year outperformance amid a crisis in the traditional banking system has some wondering if the price has rallied on a potential narrative shift. Although bitcoin was originally designed to be digital money and an alternative financial system, it has spent much of the last year trading as a speculative asset. Last week it even fell along with risky markets and bank stocks amid the uncertainty surrounding Silvergate Bank. That changed this week, however, following the shutdowns of Silicon Valley Bank and Signature Bank, giving the impression investors were trading it on its core value proposition, the ability to ‘be your own bank’. . “When the financial system shows cracks, it provides a use case for decentralization,” said Callie Cox, US investment strategist at eToro. “Of course, there are pros and cons to decentralized and centralized approaches, but for now investors seem to be focusing on one specific angle.” However, while bitcoin’s original narrative started to click for people this week, that doesn’t change the fact that macro themes are still the main driver of the price. “In practice, bitcoin is not isolated from the traditional banking system. Crypto prices have risen rapidly in 2020/2021 due to central bank monetary expansion, causing capital to shift from the traditional fiat banking world into the crypto world,” Sheena Shah, an analyst at Morgan Stanley, said in a note this week. “We therefore conclude that the bitcoin network can function without banks, but that the price of bitcoin, and therefore its purchasing power, has been and continues to be influenced by central fiat bank policy and needs banks to facilitating flows to crypto.” The Week Ahead Many agree that bitcoin price bottomed out in late 2022 during the FTX crash, but there is still so much uncertainty in the market and traders are struggling to identify what it would look like the start of a new bull run. From a technical perspective, this week’s close above $26,000 could be that signal, according to Yuya Hasegawa, an analyst at Japanese crypto firm Bitbank. Fairlead Strategies’ Katie Stockton, however, is looking for two consecutive closes above $25,200 for the formation of a “long-term bullish development.” Investors will continue to watch the banking crisis and the regulatory landscape over the coming week. On Tuesday, the Federal Reserve will begin its two-day policy meeting. “Bitcoin’s rally could stay in place if the Fed chooses to end its tightening cycle and wait to see what happens next with the banking turmoil,” Moya said. “Traders are already pricing in rate cuts this summer, so we’ll see what happens if the Fed chooses to remain focused on inflation and offer another quarter-point hike. A pause and Bitcoin could have the potential to head towards the $30,000 level.” Given the pulse of the markets and the Fed’s recent comments on inflation, Moya said a final rise should be the base case — and that could bring bitcoin back to the middle of this month’s trading range. here, he added.
Bitcoin is up 60% so far this year as investors rediscover appeal as an alternative banking system