Bitcoin is up 50% so far in 2023, beating major commodities and stock indexes. Industry insiders said the bank collapses have sent investors looking for alternatives to the traditional banking system and there is also anticipation of a slowdown in interest rate rises, which is helping bitcoin.
Filip Radwanski | Sopa Images | Lightrocket | Getty Images
Bitcoin climbed past the $28,000 level over the weekend as investors rediscover its appeal as an alternative banking system.
On Monday, the cryptocurrency had pulled back a bit. Bitcoin fell more than 2% to $27,705.23, according to Coin Metrics. Earlier in the day, it hit $28,554.07, it’s highest level in nine months.
related investing news
The weekend rally in bitcoin came amid continued turmoil in the global banking sector. On Sunday, UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.2 billion) in a deal partly brokered by the Swiss regulators looking to stem contagion across the global banking sector.
“Bitcoin continues to trade like a leading risk-on asset, like it has for the past two years,” said James Lavish, managing partner at the Bitcoin Opportunity Fund. “The rescue of Credit Suisse has put out a large credit fire… this emboldens bitcoin buyers who are now anticipating the Fed slowing the increase in rates and signaling a coming pause this week.”
As of Monday afternoon, there is about a 72% chance of a quarter-point increase by the Fed, according to CME Group data using fed funds futures contracts as a guide. The other 28% anticipates there will be no hike and that Chairman Jerome Powell may start to ease his aggressive tightening campaign due to the emerging financial contagion.
Advocates of bitcoin have often dubbed it “digital gold” referring to it as a store of value, particularly in moments of global turmoil, and one that is uncorrelated with other asset classes. However, bitcoin has more often than not traded in line with equities, and in particular the tech-heavy Nasdaq.
But there are signs bitcoin’s price movement is beginning to decouple from stocks, for now.
“If one looks at the history of bitcoin and why it was created in the first place, it was precisely for events like this where the current system shows signs of weakness and hence owning an uncorrelated asset helps,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“Over the years, this argument of bitcoin being an uncorrelated asset class has been debated quite a bit, but we are now potentially seeing that viewpoint being vindicated.”
While gold is up around 9% this year, bitcoin has surged more than 70%.
Other cryptocurrencies on Monday did not see the same jump as in bitcoin. Ether was trading roughly flat. Other cryptocurrencies are not seen as “digital gold” by proponents in the same way that bitcoin is.
“As this banking crisis plays out, it’ll be interesting to continue to watch Bitcoin price action as more and more people think of owning Bitcoin as a clever alternate to the current system,” Ayyar said.
