The price of bitcoin is rocketing following turmoil in the global banking industry as investors look for a safe haven.
Bitcoin and other cryptocurrencies bounce back after a turbulent week for banks in the US and Switzerland.
About $100 billion has been added to the crypto market in the past week as bitcoin, ethereum and altcoins like solana and cardano rocket higher.
The world’s most popular digital currency, bitcoin, was selling for $A42,060 ($US28,204) this morning, up 14 per cent for the week. It’s in the green by a massive 72.16 per cent so far this year.
On the back of the surge, Binance CEO Changpeng ‘CZ’ Zhao wrote on Twitter: “bitcoin almost died, but…”
The price of bitcoin is surging again. Picture: iStock
It marks more volatility in the crypto sphere after massive swings in the price of major coins.
Despite the surge, the price of bitcoin is down 33.22 per cent over the past 24 months. And it’s still way under the peak price of $A87,843 – which it reached on November 2021.
Over the past year, crypto has been battered by calamitous events including FTX going bankrupt, the collapse of crypto hedge fund Three Arrows Capital and the downfall of crypto lending platform Celsius.
US bank Silvergate Capital, which was heavily involved in the crypto space, also went into liquidation.
But bitcoin has been making a comeback in recent weeks and surged after a series of disastrous headlines about the global banking industry.
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Silicon Valley Bank (SVB) spectacularly failed on March 10 as spooked investors started a bank run when the bank revealed huge losses. The value of the SVB’s bonds had been hit hard as the US Federal Reserve shoved up interest rates in response to surging inflation.
Signature Bank also went belly up last week. Signature’s collapse has been attributed to a “crisis of confidence” rather than its links with crypto.
Investors are now increasingly wary and have been withdrawing funds from institutions considered to be at risk.
There are warnings that 186 banks across the US could fail if half of their depositors were to withdraw their funds quickly.
Credit Suisse chairman Axel Lehmann fronts the media after the announcement that UBS would buy his bank for $3 billion. Picture: AFP
In response, regulators have been urgently attempting to restore confidence in the system. Last week the US government took the extraordinary step of protecting deposits amid fears of a more widespread bank run.
The stocks of American and European banks were hit hard, and overnight, it was announced embattled Swiss bank Credit Suisse would be bought by its rival UBS for $US2 billion ($A3 billion).
The price of bitcoin and ethereum surged after both US bank failures and again after the news of the Credit Suisse purchase.
Crypto was also buoyed by growing expectations that central banks in the US and Australia will rein in further interest rates hikes.
Ilan Solot, co-head of digital assets at Marex, told Bloomberg: “Bitcoin is correlated with liquidity conditions and real rates. Real rates have declined, liquidity conditions have expanded, and it looks as if we’re entering a new regime.”
David Martin, head of institutional coverage at digital asset prime brokerage FalconX, said investors were increasingly looking to bitcoin during the turmoil.
The vulnerability of the traditional banking system has also helped boost the case for crypto, which in part was why bitcoin was created in the first place.
Stephane Ouellette, chief executive of FRNT Financial, told the Australian Financial Review: “An environment where higher interest rates after a period of hyper-low interest rates are creating bank runs is about as perfect a bitcoin use-case as one can think.”
