Bitcoin pulls back to start May as First Republic Bank saga comes to an end

In this article

Bitcoin is under pressure as the Federal Reserve has indicated that rates could go higher than expected and after a major crypto-focused lender, Silvergate Capital, collapsed.
Jonathan Raa | Nurphoto | Getty Images

Cryptocurrencies took a dip on Monday to start the week and new month as investors bet the takeover of First Republic Bank could put an end to the financial crisis, which has been the biggest driver of this year’s bitcoin rally.

Bitcoin fell about 4.2% to 28,137.76 to start the week and new month, according to Coin Metrics. Ether lost 4% to 1,828.81.

On Monday regulators took possession of First Republic, making it the third U.S. bank failure this year and the biggest one since the 2008 financial crisis. JPMorgan Chase will acquire most of its deposits and assets.

Last week, the price of bitcoin rallied in the final week of April as troubles at the bank unfolded. Trading of the cryptocurrency has been choppy, however, as investors straddle the effects of the banking crisis on crypto with high inflation, Federal Reserve policy, a potential recession and an increasingly bearish narrative building around the U.S. dollar.

“It’s unclear whether the banking crisis narrative can continue to be a boon for bitcoin,” said Alex Thorn, head of firmwide research at Galaxy. “Overall, the market lacks clear positive near-term catalysts, with supply issues overhanging bitcoin … That being said, bitcoin accumulation by small addresses is outpacing issuance, and we expect Ethereum staking to increase, each of which provides a supportive supply narrative.”

“Outside of crypto-native factors, we expect a back-of-the-year macro environment to be characterized by tightening, recession, and an expanding multipolarity in the global economy, all of which can be supportive of gold and bitcoin,” he added.

Investors have been expecting a slowdown from bitcoin’s first-quarter rally, although cryptocurrency remains on its upward trend and has gained about 70% for the year, after finishing down more than 60%. April marked the first time in two years that bitcoin notched a fourth consecutive positive month.

“Bitcoin and ether started 2023 inorganically cheap, allowing for plenty of room to move higher off a low-base effect,” Thorn said. “A widening banking crisis became evident in March and the contrast with Bitcoin’s transparent and decentralized nature provided a further leg up for bitcoin, while Ethereum’s successful Shanghai upgrade provided a catalyst for ethereum.”

Products You May Like

Articles You May Like

Is it a great wealth transfer or retirement savings crisis? It can be both, expert says
Spirit Airlines isn’t considering Chapter 11, ‘encouraged’ by post-JetBlue plan, CEO says
Biden economic advisor unveils ‘key principles’ for tax policy plan ahead of expiring Trump tax cuts
Robotics startup cofounded by Synapse CEO is raising funds with exaggerated claims about GM ties
Maintenance and repair costs can be an unwelcome surprise for first-time homeowners. Here are some ways to avoid bill shock

Leave a Reply

Your email address will not be published. Required fields are marked *