Bitcoin Mints $100 Billion Rally As Banking Crisis And These Lesser Known Tailwinds Fuel Latest Rally

Topline

Bitcoin has surged in recent weeks as many lost faith in the U.S. banking system, serving as “vindication” of cryptocurrency zealot’s long-held beliefs, according to JPMorgan, but the bank’s analysts note a few other factors have helped the largest crypto token soar to a six-month high—and could help keep the rally going.

Bitcoin’s up big over the last few weeks.

Key Facts

Bitcoin is up 25% over the last month to about $28,000—reflecting about $106 billion in added market value and performing much better than the tech-heavy Nasdaq’s 3% decline over the period.

That surge came while Silicon Valley Bank, Signature Bank and Silvergate Capital each went under, events which crypto supporters believed “exposed the weaknesses of the traditional financial system,” the JPMorgan group led by Nikolaos Panigirtzoglou wrote in a Wednesday evening note to clients.

Bitcoin rallied as a “hedge to a catastrophic scenario” amid tumult in the global financial system, Panigirtzoglou added, pointing to gold’s similar rally over the last month as a safe haven asset.

Strong sentiment is not the only thing behind bitcoin’s spring bounce, as JPMorgan identified a few other, more technical aspects driving the gains.

The January launch of bitcoin ordinals, which essentially allow for non-fungible tokens to be minted on bitcoin’s blockchain, adds value to bitcoin as it “elevate[s] the bitcoin network utility to that of other blockchains” that already allow for such functions, the bank noted.

And according to Panigirtzoglou, what’s likely more important to bitcoin’s rally than the bank crisis or bullishness on ordinals is shifting attention to the digital asset’s upcoming “halving” next spring, which makes marginal bitcoin mining costs twice as expensive; bitcoin rallied as much ask 30% in the six months following its prior halving events in 2016 and 2020.

Surprising Fact

Gold is up 9% over the last month, holding north of $2,000 per ounce. The precious metal is leading a “new commodity bull super-cycle” dating back to March 2020 as various macro factors fueled uncertainty among investors, Wells Fargo analysts John LaForge and Mason Mendez wrote in a recent note to clients.

Key Background

Bitcoin remains about 60% below its November 2021 all-time high of over $65,000, though it’s up nearly 70% year-to-date. Other top tokens have rallied far less over the last month, with ether and binance coin’s respective 19% and 9% gains in the timeframe far underperforming bitcoin.

Chief Critic

“Logic… suggests a pullback” will soon come for bitcoin, Oanda analyst Craig Erlam wrote in a Tuesday note to clients. He argues turbulence in the crypto industry—including news that the Commodity Futures Trading Commission is suing exchange giant Binance—could make bitcoin’s latest rally unsustainable. “It will no doubt be interesting to see how it performs over the coming weeks, especially if further turbulence is coming for the industry,” he says.

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Key Facts

Surprising Fact

Key Background

Chief Critic

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