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Bitcoin has surged back this year, helped by a growing U.S. banking crisis that's cast serious doubts over the Federal Reserve's ability to contain the situation.
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The bitcoin price has almost doubled since dropping to lows of around $15,000 per bitcoin late last year, climbing along with the ethereum price and other smaller cryptocurrencies, as traders turn their attention to a looming $31.4 trillion earthquake.
Now, after a well-known tech investor admitted he'd burnt "a million to tell you they're printing trillions," JPMorgan analysts have credited the U.S. banking crisis with pushing retail traders toward bitcoin over recent months -- a hedge against what they call a "catastrophic scenario."
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"The U.S. banking crisis has increased the demand for gold as a proxy for lower real rates as well as a hedge against a 'catastrophic scenario," JPMorgan strategists led by Nikolaos Panigirtzoglou and Mika Inkinen wrote in a note to clients seen by Bloomberg, adding that while institutional investors piled into gold, retail investors have boosted their exposure to bitcoin as a buffer against the rising risk of a U.S. recession this year.
The banking crisis that began with Silicon Valley Bank and crypto-friendly banks Silvergate and Signature earlier this year has since claimed San Fransisco's First Republic and crashed the stock price of Los Angeles-based PacWest and Arizona's Western Alliance.
The bank sell-off this week came despite reassurances by Federal Reserve chair Jerome Powell that the U.S. banking system remained "sound and resilient," following the Fed's 10th consecutive interest rate hike, pushing rates to a 16-year. The Fed's rapid series of rate hikes has been partly blamed for the banks' problems.
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This week's Federal Reserve interest rate "hike will continue to add pressure to regional bank balance sheets," Nauman Sheikh, head of treasury management at bitcoin and crypto investment manager Wave Digital Assets, said in emailed comments.
"It appears we're back to macro factors driving markets. Against this backdrop, we're in a risk-off mode in crypto at the moment," Sheikh added, pointing to "the continued dominance of bitcoin relative to ethereum performance."
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