Bitcoin Fans Look To $30,000 As Next Target As Trouble Swirls Around Banks
(Bloomberg) — With Bitcoin staging a staggering rally in recent days amid turmoil within the global banking system, its advocates are now turning to the coin’s next important milestone: $30,000.
The largest digital coin has gained roughly 25% since March 8, when signs first emerged of trouble around Silicon Valley Bank, which has since folded and ignited turmoil among other lenders. The digital currency has added more than 20% since the start of the month to trade around $28,000, its highest since June of last year when a series of implosions within the digital-assets space itself rocked the industry and pressured prices. It last traded at $30,000 during the meltdown of now bankrupt lender Celsius, also in June.
Those watching its new surge say some investors might be finding comfort in the idea that Bitcoin and other digital assets are out of reach of regulators and are outside the financial system, which in some ways isolates them from the issues affecting the broader bank sector.
Read more: Bitcoin Believers Revel in Told-You-So Moment as Banks Crumble
“Intellectually, you could see that attractiveness to it where you don’t need to be worried about the Fed coming in,” said Chuck Cumello, president and chief executive officer of Essex Financial Services. “That’s not to say that Bitcoin doesn’t have a host of other issues that the average person should be worried about,” he said, “but that was one of its siren songs, that was one of the things that drove and attracted people to it, and I’m not surprised in any way, shape or form that it’s up in this kind of environment.”
Three US lenders — Silicon Valley Bank, Silvergate Capital Corp. and Signature Bank — have been embroiled in the current episode, with investors on the lookout for any others that might still be affected as regulators look to stem further fallout. The crisis of confidence has spread to Europe as well, where over the weekend UBS Group AG agreed to buy Credit Suisse Group AG for more than $3 billion in a government-brokered deal. Market-watchers say that it’s all helping Bitcoin rally.
“Bitcoin is on an absolute tear,” wrote a team at Kaiko led by Dessislava Aubert and Clara Medalie. “Market sentiment has undergone a dramatic reversal over the past week, bolstered by an ongoing banking crisis that has strengthened crypto’s original narrative among investors.”
Research from the firm shows that crypto trading volumes reached their highest level since the FTX collapse at the end of last year.
Bitcoin proponents have also pointed to its other purported characteristics as a reason to hold the coin in this environment, including that it could potentially be used as a hedge against inflation thanks to its limited supply. Still, that proposition has been put to the test over the past two years, during which cost-of-living prices have increased sharply as the coin has lost more than 50% in value.
No matter the cause, the coin — and others — have been jumping higher, with the $30,000 milestone remaining key for the largest token. If anything, round numbers tend to be psychologically important for investors. In an interview with Bloomberg News last year, the founders of Three Arrows Capital pointed to $30,000 as having been a pain-point for their fund once the token’s price broke below that level.
Yet, thanks to its quick uptick, Bitcoin is trading in technically overbought levels, points out Matt Maley, chief market strategist at Miller Tabak + Co., and that might make it more difficult for it to cross the critical point.
“Bitcoin has been an asset that has moved with liquidity flows in the past. With this crisis, the Fed injected liquidity last week, so I think the move has more to do with added liquidity than investors seeing Bitcoin as a flight-to-safety asset,” said Maley. “It’s getting overbought, so Bitcoin will have a tough time breaking above $30k as this crisis calms down.”
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