Bitcoin Holds $43K Amidst U.S. Bank Stocks Decline: A Deeper Look

Jonathan Stoker Feb 02, 2024, 00:20am 97 views

Bitcoin Holds $43K Amidst U.S. Bank Stocks Decline: A Deeper Look

Bitcoin Maintains Steady Performance Amidst US Banking Concerns

BitcoinBitcoin$42,260 -0.64% (BTC) exhibited a steady performance around $43,000 on Thursday amidst renewed concerns over the health of the US banking sector, reminiscent of last March's banking turmoil. New York Community Bancorp (NYCB) shares continued their slump, registering a decline of over 40% since Tuesday, a pattern similar to last March. The decline was fuelled by losses from its commercial real estate loans and a reduction in its dividend. The KBW Nasdaq Regional Bank Index (KBR) fell an additional 2% after experiencing its largest drop since March the previous day.

Federal Reserve's Key Language Removal and its Implications

The market noted the significance of the Federal Reserve's removal of key language about the US banking system's resilience from its recent statement regarding its decision on interest rates. This change, mostly overlooked by Federal Reserve Chair Powell's dismissal of impending rate cuts, was pointed out by Quinn Thompson, head of capital markets and growth at Maple Finance. Thompson highlighted that the removal of the phrase ‘the U.S. banking system is sound and resilient' was the most crucial line overlooked, as indicated by the performance of traditional safe haven asset gold relative to US bank stocks.

Bitcoin's Performance During Previous Banking Crisis

During the banking crisis in March of last year, Bitcoin demonstrated a sharp rally, almost reaching $30,000 from $20,000, after a brief decline. This surge marked Bitcoin as a potential safe haven asset, independent of the banking system's problems.

Current Muted Reaction from Bitcoin

So far, Bitcoin's price has shown a muted response. The largest cryptocurrency by market cap bounced slightly higher from below $42,000 earlier in the day and has been consolidating in the familiar channel capped at $44,000. As of the most recent update, BTC was trading just below $43,000, indicating a 1% increase in the past 24 hours. The source 20 {{CD20}}, a broad crypto market benchmark tracking the largest crypto assets, gained 1.5% during the same period.

The interesting yet puzzling duality of the BTC market is highlighted by BTC's 'risk off' behavior yesterday-sometimes it's a macro risk asset, sometimes it's a hedge against macro risk, commented Noelle Acheson, analyst and author of the 'Crypto Is Macro Now' newsletter.

Maple's Thompson expressed surprise at Bitcoin's delayed reaction but remains cautiously long. Dan Tapiero, a notable digital asset and venture capital investor, stated, Traditional 'stores of value' are slowly eroding. Commercial real estate and local US banks were always seen as safe assets to store wealth. Now, with limited alternatives such as gold, art, equity, bonds and so on, Bitcoin is emerging as our new tech-enabled world store of value.

Edited by Jonathan Stoker

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