Cryptocurrencies took a beating this week as bank stocks plummeted and the global liquidity crisis rocked the stock market. For the week ending March 17, bitcoin finished up 34%, making it the cryptocurrency’s best week since January 2021 — marking the beginning of the institution-led bull run that year. Coin Metrics measures a week in crypto, which is traded 24 hours a day, from the stock market close on Friday to the next. Bitcoin is now up 62% for the year. BTC.CM= YTD Mountain Bitcoin (BTC) in 2023 Ether ended the week higher by 23%. At one point, it was trading at around $1,780, a level not seen since the rally leading up to the Ethereum merger in September. Ether is up 45% so far. “Crypto has made an impact as an unexpected banking crisis has led to the realization that Fed policy is very restrictive and that the economy is headed for recession,” said Ed Moya, senior market analyst at Oanda. “The Fed must now decide whether they have enough information about the escalating risks spreading across several banks. Inflation is moving down, but some officials may want to push another rate hike before pausing and that could trigger a moment of risk reduction .” on Wallstreet.” Bitcoin vs. the Banks. Bitcoin’s price rose twice above the key $25,200 level to more than $26,000, according to Coin Metrics. It hasn’t seen that level since June, days before its pre-FTX bottom of about $18,000. BTC.CM= 1Y mountain Bitcoin, 1-year Bitcoin’s outperformance amid a crisis in the traditional banking system led some to question whether the price rose after a potential narrative shift. Although Bitcoin was initially designed as digital money and an alternative financial system, it spent much of last year’s trading as a speculative asset Last week it even fell with risk markets and banking stocks amid the uncertainty surrounding Silvergate Bank However, that shifted this week following Silicon’s closures Valley Bank and Signature Bank, which made it seem like investors traded it based on its core value proposition, the ability to “be your own bank.” If the financial system is cracking, that 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, if the original bitcoin story started to click for people this week, it doesn’t change the fact that macro themes are still the biggest driver for the price. “In practice, Bitcoin is not isolated from the traditional banking system. Crypto prices rose rapidly in 2020/2021 due to the central bank monetary expansion, which moved capital from the traditional fiat banking world to the crypto world,” Sheena Shah, an analyst at Morgan Stanley, said in a note this week. “So our conclusion is that the Bitcoin network can operate without banks, but that the price of bitcoin, and thus its purchasing power, has been and continues to be influenced by fiat central bank policies and needs banks to facilitate flows into crypto.” The Week Ahead Many agree that bitcoin price bottomed out in late 2022 during the collapse of FTX, but so much uncertainty remains in the market and traders are finding it difficult to determine what the start of another bull run looks like would see. 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. However, Katie Stockton of Fairlead Strategies is looking for two consecutive closes above $25,200 for the formation of a “bullish long-term development.” Investors will continue to monitor the banking crisis and regulatory landscape in the coming week. The Federal Reserve will begin its two-day policy meeting on Tuesday. “Bitcoin’s rally could continue if the Fed chooses to end the tightening cycle and wait and see what happens next with the banking turmoil,” Moya said. “Traders are already pricing in rate cuts this summer, so we will see what happens if the Fed chooses to stay focused on inflation and raise another quarter point. A pause and Bitcoin could have the potential to bounce to the $30,000 level. to go. .” Given the pulse of the markets and the Fed’s recent comments on inflation, Moya said a final hike should be the base case — and that could bring bitcoin back to the middle of this month’s trading range, he added .
Bitcoin is up 60% year to date as investors rediscover its appeal as an alternative banking system