Some investors cited anticipation that the Federal Reserve will inject money into the economy in the coming weeks in response to symptoms of yet another U.S. bank failure as the reason why Bitcoin (BTC) increased to $29,000 on Wednesday morning in Europe. According to TradingView statistics, the level was last reached on April 20.
Tuesday saw a 50% decline in First Republic Bank (FRC) stock after the San Francisco-based lender disclosed a sharp decline in deposits. Investors withdrew more than $100 billion from the bank this quarter, raising fears that it will fail, joining Silicon Valley Bank and Signature Bank, as the third bank.
The decline pressured U.S. markets, with the tech-heavy Nasdaq 100 falling roughly 2% and the Dow Jones Industrial Average losing 1%. In contrast, bitcoin has increased 6.4% over the previous day, following safe-haven assets like gold in nearly reversing all of the losses from the sell-off last week.
Cardano (ADA) and Solana (SOL) token increases of more than 7% led advances among significant tokens, contributing to a 4.9% increase in the total market capitalization of cryptocurrencies.
Some commentators hypothesized that the rally resulted from anticipation of a Fed liquidity injection intended to safeguard its capital markets.
Jake Boyle, a director of retail cryptocurrency brokerage Caleb & Brown, wrote in an email to CoinDesk, “With First Republic Bank looking like it could go under, I suspect the market is anticipating yet more liquidity injections to prop up what certainly seems to be an American banking sector that is still very much in the throes of crisis.”
As a result, Bitcoin is beating these predictions. It will be extremely challenging for the Fed to continue adhering to its tightening policy moving forward since cracks in the financial system are widening, even if they are doing so softly right now, he added. Bitcoin’s recent surge is more a result of liquidity additions and growing anticipation that the Fed’s tightening will likely come to a stop shortly.